New Delhi: Maintaining that mere continuation of temporary loan moratorium would not be in borrowers’ interest, the RBI has told the Supreme Court a moratorium exceeding six months might vitiate the overall credit discipline and have a “debilitating impact” on the credit creation process.
Announced by the RBI in March for three months, loan moratorium is a legal authorisation to debtors to postpone the payment of EMIs. It was extended to six months till August 31. The government said more than 50 per cent of the borrowers didn’t avail moratorium. The apex court is hearing a bunch of pleas, including the one which has sought a direction to declare the portion of an RBI notification, issued on March 27, “ultra vires to the extent it charges interest on the loan amount during the moratorium period”.
In its affidavit, the RBI said any waiver of interest on interest would entail “significant economic costs” which cannot be absorbed by the banks without serious dent on their finances and this, in turn, would have huge implications for the depositors and the broader financial stability.
It also requested the top court to vacate “with immediate effect” its September 4 interim order restraining banks from classifying accounts into NPAs.