Can’t extend moratorium on loans: RBI to SC: The Tribune India
New Delhi, October 10
Arguing that simply continuing the temporary loan moratorium would not be in the best interests of borrowers, the RBI told the Supreme Court that a moratorium of more than six months could vitiate overall credit discipline and have an “impact.” debilitating ”on the credit creation process.
Announced by the RBI in March for three months, the loan moratorium is a legal authorization for debtors to defer payment of IMEs. It was extended for six months until August 31. The government said more than 50 percent of borrowers had not taken advantage of the moratorium. The Supreme Court hears a slew of pleadings, including one that requested an instruction to declare the portion of an RBI notification, issued March 27, “ultra vires to the extent that it charges interest on the loan amount during the moratorium period “.
In its affidavit, the RBI said that any waiver of interest on interest would entail “significant economic costs” which cannot be absorbed by banks without seriously damaging their finances, which, in turn, would have to do with it. ‘Huge implications for depositors and the broader financial system. stability.
He also asked the highest court to cancel “with immediate effect” its provisional order of September 4 prohibiting banks from classifying accounts as NPA. – TNS