NEW DELHI: While the Centre on Monday sought more time from the Supreme Court to clarify its stand on ‘interest on interest’ on suspended EMIs during the loan moratorium period, sources told TNIE that the finance ministry has made up its mind that it cannot be waived off.
“The Department of Financial Services has already spoken to banks and is of the view that waiving this interest on interest will further strain the financials of banks. One cannot weaken one business to strengthen another business. Banks have raised their concern in this regard and their feedback had been submitted to the Centre,” said a senior finance ministry official.
Similar feedback was given by the Rajiv Mehrishi panel, whose report is yet to be made public, the official added.
“The Mehrishi panel’s view is that the government can bear the burden of interest on interest, so that neither bankers nor customers will have to take a hit. But the overall financial burden on banks will have to be calculated. Given the situation of the exchequer, this is not a comfortable option. Much will depend on what RBI says,” the official told TNIE.
On Monday, the Centre informed the Supreme Court that it will take a decision on the interest on interest issue in the next two or three days.
The case has been pending in the top court for the past few months.
In May, RBI told the court that it was not in favour of a “forced waiver of interest” as it would not only hurt the financial viability of banks but also affect the interests of depositors.
Subsequently, the finance ministry told the SC it was in agreement with RBI’s stand.
This drew sharp comments from the court, that the government cannot hide behind RBI and should clarify its stand in no uncertain terms.
The SC, then, ordered the Centre, RBI and banks to file a ‘concrete’ response after ‘holistically’ considering the interests of everybody.
Loan moratorium case adjourned till October 5
The Supreme Court on Monday adjourned the loan moratorium case till October 5, granting more time to the Centre, RBI and banks to work together and file a concrete reply on their stand.