New Delhi: Waiver on interest during moratorium on term loan repayment would jeopardise the financial health and stability of banks, as well as the interest of debtors, the Reserve Bank of India (RBI) told the Supreme Court Wednesday.
The RBI made this submission in an affidavit before the top court, which had sought its response to a public interest litigation (PIL) on whether interest ought to be taken from borrowers if they availed the benefit of moratorium on loan repayment.
In the wake of the pandemic and subsequent lockdown, the RBI had on 27 March issued a circular, allowing banks to grant a moratorium to borrowers on payment of installments for three months. An extension of the moratorium period was announced on 22 May, making it a six-month moratorium.
The petition was filed by Agra resident Gajendra Sharma earlier last month against the RBI circular dated 27 March because it allowed interest on the loan amount to accrue.
Sharma’s petition informed the court he had taken a home loan of around Rs 37 lakh from ICICI Bank, and that due to the lockdown, he has no income and so cannot pay the EMI.
Sharma said the circular’s objective would be rendered futile if interest is levied later. He contended interest should not be charged during the moratorium period.
Also read: This is what you need to do if you want to pay, or not pay, your loan EMI for 3 months
Waiver will jeopardise financial health of banks: RBI
The RBI said the objective behind its circular was to “mitigate the burden of debt servicing on account of the disruption caused due to the pandemic”.
There cannot be a waiver of interest as it would jeopardise the financial health and stability of banks, said RBI.
The decision (of moratorium), it said, was to ensure continuity of viable businesses. The regulatory package to defer payment of loan cannot be construed as a waiver, the RBI clarified.
Banks, it said, are expected to run viable commercial considerations and are guardians of the depositors’ monies. Actions of the banks, affidavit added, need to be guided by the interest of the depositors.
Interests charged by banks would form an important source of income, the reply stated, elaborating on the importance of permitting banks to charge interest.
Responsibility to control banking business
The RBI affidavit stated that to help borrowers, it had on 23 May issued an order, stating: “Lending institutions may, at their discretion, convert the accumulated interest for the deferment period up to August 31, 2020, into a funded interest term loan (FITL) which shall be repayable not later than March 31, 2021.”
As it is governed by the RBI Act and the Banking Regulation Act, the RBI said, it is entrusted with the responsibility of controlling banking business. Therefore, it is its duty to ensure that banks carry out their operations prudently. Hence, it would not be appropriate to go for forced waiver of interest in this case, the RBI added.
Also read: RBI uses bazooka to fight virus with 75 bps rate cut, moratorium on term loan repayments
Bank are taking advantage of it I had a personal loan from ICICI and take moratorium for 2 months now bank has extended my loan for 4 months, mean 2 EMI of 7616.00 as interest, which may be right but problem is I paid my emi in moratorium period even though they penalize me, after lot’s of request they refund my paid emi ka impose me the interest.
I have all the mail if you want
File FIR in police station against particular bank charging bounce charges and late fees during moratorium periods and file write to information act about moratorium against RBi
Sir agar bade bade bank ek saal hazaro crore nahe. Kamayege to croro Jaan bach jayeki jinse wo fir lakho crore kama sakte hai par us samay agar logo ka sara paise bank chus lenge to log kaise zinda rahenge.
Sociye to sahe…
Mana aapko kewal banko ki sehat ka Dyan rakhna hai par is janta ke liye janta ke paise se he bank bane hai kya janta ko jeene ka koi haq nahe. Sare haq amiro ko he hai kya?????
Pl. Think about to give waiever in emi interest. Just think if small business people or middle man if company suspended from job then no emi or any loan amount he paid. And he is getting stressed and may be he can be over his life. And big people who take loan of huge amount and go outside India or not pay any money then our economics is very better but turn of middle people our economy become worst. Wow what a govt. Economy run from middle and small people think about that….
Pl. Think about to give waiever in emi interest. Just think if small business people or middle man if company suspended from job then no emi or any loan amount he paid. And he is getting stressed and may be he can be over his life. And big people who take loan of huge amount and go outside India or not pay any money then our economics is very better but turn of middle people our economy become worst. Wow what a govt. Economy run from middle and small people think about that….
The RBI should pass a rule to wave off the interest on loan and the late payment fees on credit card as people are not getting salary and it is very difficult for a middle class person to pay all this. please look forward to help your own people, if you can provide 20lakh crore funding to ease things than please come forward and help the common people.
When loans itself are waived for defaulters, interest waiver for deferred EMIs due to Lockdown will ease strain on prompt borrowers and plan for further repayments of EMI.
Sir,
I am running a small business of photocopying. Shop is on rent. Taken home loan from co-op bank. Can’t pay EMI.
By my opinion at least loan interest should be waived.
I am feeling anxious now.
What should I do?
Sir, please RBI must think on how UK (Lloyd’s, Halifax)banks are doing & also in Australia banks & in US & in China banks doing, banks are increasing loans and increasing credit card limits . But here in India we are adding more % by saying moratorium. If people get frustrate. OMG, no one will pay.
Banks will give 6 months cooling period to msme lones then why can’t that do for individuals ?
Friends ask your friends in abroad are they charged extra % on moratoriums. Then take a decision.
At least reduce 50 percent intrest very difficult situation.
Mr. Das(RBI), if yo can write off interest for big defaulter who staying and living lavish life in abroad. Why cant you do interest waiver during this pandemic. Why don’t you and your team work full fledge to try recover interest from big defaulters(>1Cr) to make GDP stable instead of trying to over burdening common people.
There has been a big hue and cry relating to the deferment of EMI and interest in card on the term loans.
This covid-19 period is virtually very much troublesome for those persons who are earning their bread and butter on daily basis jobs aur jobs who are disturbed by the covid-19 unwanted situation.
The government has taken care of all those persons who are in trouble due to this covid-19 pandemic.
header with think of 20 lakh crore funding by government to ease the life of those persons who are in trouble in in giving their EMI of their term loans.
When it comes to interest payment by the borrowers who have applied for EMI deferment has been a major bone of contention between banks Government and borrowers.
It is to be thought very neatly that either bank or government or borrowers must not suffer but there must be a solution which is imminent.
When we are seeing that worldwide the government it is pumping funds to ease the life of mass public, the borrowers are also considered as mass public because the earning has been stopped due to this pandemic.
Now when the RBI says that if the loans interest is waived the bank have to to lose 2 lakh crores of fund which will impact the functioning of banks as a whole.
in this precarious situation the RBI/govt is the authority which have to take care of not only Bank but also the borrowers and the public, who is suffering by this covid-19 pandemic.
So there must be a solution for it and this solution can be considered by viewing the troubles of both borrower and bank as a whole by the Reserve Bank of India.
It should be considered that Bank should not suffer and it should also be thought very precisely that borrowers who are in in a very difficult situation for paying the interest or EMI right now must also not suffer much.
The solution is not big one as because Government have to bear some trouble of borrowers by giving them an extra loan facility of the interest amount which should be interest free in nature.
This will give both the parties borrowers and Bank 50_50 relief where bank will get their due amount of interest but in EMI by the borrowers in due term.
We request Reserve Bank of India and government authorities to think over it and and make the circular accordingly.
When RBI CAN WRITTEN OFF BAD DEBTS OF 68000CR. WHY CAN’T RBI BEAR 2 LAKH CRORE FOR WHOLE INDIA WHO IS REALLY SUFFERING BECAUSE OF PANADEMIC.