RBI Cautions Supreme Court on Interest Waiver During Moratorium

Interest Waiver During Moratorium

Supreme Court received a plea seeking the interest waiver during the moratorium then later supreme court issued a notice seeking a reply from the regulator on interest waiver during moratorium of six months.

RBI Reply to SC

Reserve Bank of India filed a reply to the Supreme Court and cautioned of not allowing a plea seeking interest waiver, RBI estimated that a “Forced” interest waiver will hurt the banks and the financial system by as much as Rs.2 Lakh Crores (which is approximately 1% of GDP).

RBI argued that the “forced waiver is neither prudent nor appropriate.” Because this forced interest waiver will risk the financial viability of banks which in turn may put depositors in worry.

RBI also said that banks must remain sound and profitable to ensure the safety of its depositors as well as the financial stability of the country.

It also added that the moratorium is a deferment of existing and current liabilities but the petitioner mistakenly constructed it as a waiver of interest which is not viable for banks as well as the financial stability of the country.

Importantly RBI has already clarified that availing benefits under the moratorium will be entirely as per lenders’ policies. It also clarified that decisions regarding eligibility of the customer, onboarding customers, and interest recovery has been left to the lenders only.

As RBI has sent its reply to the Apex Courts, now it’s their decision whether they will go ahead with this petition or they will discard it on these grounds where central bank being a regulator has already warned them about the impact that this forced waiver will have on banking and financial institutions, depositors and the country.

Let’s see where this Forced Waiver takes the turn and unveils its new dimensions. Do let me know what you think about it and are you in favor of this forced waiver or not? Tweet me your views @gurpreet_saluja

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