The Centre on Tuesday informed the Supreme Court that it would have to forego additional than Rs 6 lakh crore if it was to take into consideration waiving interest on all loans and advances to all categories of borrowers for the six-month moratorium period announced by the RBI in the backdrop of the Covid-19 pandemic.
Solicitor General Tushar Mehta, representing the Centre, stated that if the banks had been to bear this burden, it would necessarily wipe out a substantial and significant component of their net worth, rendering most of the banks unviable and raising a really critical query mark more than their really survival.
He added that it might not be probable to give the precise percentage to the borrowers who have not availed the moratorium and have deposited instalments in time, and around such class would be additional than 50 per cent.
Mehta submitted just before a bench headed by Justice Ashok Bhushan that this was one particular of the most important factors why waiver of interest was not even contemplated and only payment of instalments was deferred.
The bench, also comprising Justices R.S. Reddy and M.R. Shah, was hearing a batch of pleas of major borrowers — from genuine estate and energy sectors — searching for sector-sensible relief amid the pandemic.
“If the interest is waived on all the loans and advances for the moratorium period, with regard to all classes and categories of borrowers, the amount to be foregone would be more than Rs 6 lakh crore,” submitted Mehta.
The Centre has insisted that continued payment of interest (like interest on interest) to depositors is not only one particular of the most critical banking activities, but is a large duty that can in no way be compromised as most of the depositors are bound to be little depositors, pensioners and so on. surviving on the interest from their deposits.
Citing the State Bank of India, Mehta contended that interest quantity from borrowers through the moratorium performs out to be Rs 88,078 crore whereas the interest payable to the depositors through the stated period performs out to be Rs 75,157 crore.
Mehta reiterated that any additional relief might be dangerous to the general financial situation. Citing sector-certain relief measures for little and midsized company/MSMEs — like from sectors such as restaurants and hotels and so on. — Mehta stated: “The Central government has promulgated the Emergency Credit-Linked Guarantee Scheme (ECLGS) of Rs 3 lakh crore providing additional credit at lower rate of interest, with 100 per cent government guarantee and no fresh collateral. The scheme has been extended with higher financial limits to 27 Covid-19 impacted sectors, including the restaurant and hotel sector.”
The hearing will continue on Wednesday.