Ready to waive interest on loans up to ₹2 Cr: Centre tells SC

The Centre on Friday (October 2) told the Supreme Court that it is ready to waive the interest on the repayment of loans of up to ₹2 crore, on which the Reserve Bank of India recently granted a six-month moratorium due to the coronavirus pandemic.

The waiver will apply to loans taken by Micro, Small and Medium Enterprises, educational, housing, consumer goods and auto loans among others.

“Under pandemic conditions, the only solution is for the government to bear the burden of waiving the interest,” the government said in its affidavit.

Related news: Loan moratorium extendable for two years: Centre tells Supreme Court

The Centre informed the court that it will seek the Parliament’s permission to start the loan waiver process.

The case will be next heard on Monday (October 5).

The Finance Ministry said it has decided to extend the waiver to only a certain section of borrowers, as the waiver of interest on loans to every category would bring a loss of around ₹6 lakh crore for banks, wiping out a “major part of their net worth”.

The RBI in view of the COVID-19 pandemic granted borrowers a six-months’ freeze on their loan repayment, ending on August 31.

While government, earlier had refused to waive the interest on loans, it changed its stance on the recommendation of a government panel headed by former Comptroller and Auditor General Rajiv Mehrishi.

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In June, the RBI had opposed a waiver during the hearing on a plea filed Gajendra Sharma, who argued that levying interest on loans under moratorium defeats the move of the objective.