Media report indicates banks oppose interest waiver during moratorium

A recent media report has said that lenders have communicated to the government and the Reserve Bank of India (RBI) that they are opposed to an interest waiver on loans during the moratorium period announced earlier by the government to help citizens tide over money crunch due to the lockdown owing to Coronavirus pandemic.

The report published by The Economic Times said that representatives of banks met officials from the finance ministry and the RBI on Monday to finalise the government’s decision on the subject. Officials from the Indian Banks Association (IBA) and the heads of some state-run lenders were present at the meeting, the report said.

“Banks led by IBA have presented key points to the finance ministry pertaining to the moratorium and how it will hit their bottom line if any waiver is granted,” a source told the paper.

“How is it fair to banks that we have to the compensate borrowers and also keep paying depositors, shouldn’t banks also seek moratorium or waiver to pay interests on deposits?” the source added.

The RBI granted a moratorium on term loans whose instalments are due between March 1 and May 31, which was later extended till the end of August.

The moratorium is intended to provide borrowers some relief during the COVID-19 outbreak and consequent lockdown.

The IBA might file a separate application which would state that a waiver on the interest would hurt the financial system, the report said.

The central bank had on June 4 communicated to the Supreme Court (SC) that lenders might lose around 2 lakh crore if interest is waived completely during the moratorium.