Banks oppose interest waiver during moratorium: Report

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.

Representatives of banks met officials from the finance ministry and the RBI on June 15 to finalise the government's decision on the subject, The Economic Times reported.

Officials from the Indian Banks Association (IBA) and the heads of some state-run lenders were present at the meeting, the report said.

Moneycontrol could not independently verify the story.

"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.

Also read: View | Supreme Court shouldn't meddle with loan moratorium

"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.

Such a burden would hurt the financial viability of banks, the RBI added.

The State Bank of India on June 12 filed an intervention application in the SC against the plea seeking interest waiver on term loans during the moratorium.