New Delhi: The Reserve Bank of India has filed an affidavit before Supreme Court in the loan moratorium case hearing and said that it is not possible to give more time as relief for sectors hit by the coronavirus pandemic.
In its fresh affidavit, the apex bank told the apex court, “Resolution Framework issued by the Reserve Bank on August 6, 2020 is aimed at facilitating revival of real sector activities and mitigating the impact on the ultimate borrowers, which are under financial stress caused by economic fallout on account of Covid-19 pandemic.”
“In terms of the Resolution Framework, only those borrower accounts shall be eligible for resolution which were classified as standard, but not in default for more than 30 days with any lending institution as on 1 March, 2020.”
The central bank reasoned that a complete waiver, on the other hand, of compound interest (interest on interest) chargeable during the six-month moratorium would destabilise ;broader financial stability’ and irreparably dent the banks.
“A long moratorium exceeding six months can also impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments. It may result in vitiating the overall credit discipline, which will have a debilitating impact on the process of credit creation in the economy. It will be the small borrowers who may end up bearing the brunt of the impact, as their access to formal lending channels is critically dependent on the credit culture,” the RBI told the Supreme Court in an affidavit filed late on Friday.
In its earlier affidavit in the loan moratorium case hearing, the Centre had said that policy decisions were the domain of the executive government and court should not go into the issue of sector-specific reliefs.