As a huge sigh of relief for individual and MSME borrowers amid pandemic, the government told the Supreme Court that it is ready to waive interest on the repayment of loans of up to Rs. 2 crore, that has been frozen by the Reserve Bank of India (RBI).
This big relief will help loans taken by MSMEs (Micro, Small and Medium Enterprises), for educational, housing, consumer goods and auto loans and for credit card dues. So, loans taken by individuals for educational, housing, consumer goods and auto loans and for credit card dues can also avail the benefit. While, those who have cleared their loan dues during the moratorium period will also get the benefit.
On Friday, the Government submitted an affidavit where it said, "Under pandemic conditions, the only solution is for the government to bear the burden of waiving of interest," adding that it will seek parliament's permission for grants to enable the move.
Meanwhile, the Finance Ministry says waiving off interest on loans to every category would amount to a burden of Rs. 6 lakh crore for banks. "If the banks were to bear this burden, it would necessarily wipe out a major part of their net worth, rendering most of the banks unviable and raising a very serious question mark on their survival," it says.
This specific case will be taken up again on Monday (October 5). Looking into the earlier move, the RBI had granted borrowers a six-month freeze on their loan repayments which ended on August 31. Even, the centre and the RBI had earlier told the apex court that the moratorium can be extended by up to two years.
However, the Supreme Court last week directed the centre to come up with a concrete plan to help borrowers amid the pandemic.
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