India opposes plea to waive loan-interest during Covid-19 pandemic

While regulators have allowed a six-month freeze on principal repayments, Solicitor General Tushar Mehta told the Supreme Court on Wednesday that waiving interest could destabilize banks, the people said.

India’s government is against a petition to waive interest payments on loans during the coronavirus pandemic, according to people with knowledge of the court proceedings.

The three-judge bench headed by Justice Ashok Bhushan adjourned the hearing to early August to allow the finance ministry and Reserve Bank of India more time to revisit the issue, the people said. (HT Photo)

While regulators have allowed a six-month freeze on principal repayments, Solicitor General Tushar Mehta told the Supreme Court on Wednesday that waiving interest could destabilize banks, the people said. They asked not to be identified as the hearing was via video conference and details aren’t yet public.

The government’s stand will come as a relief to banks that have been hit by the loan freeze as well as a slump in demand. Stress among lenders, already trying to clear up one of the world’s worst piles of soured debt, is expected to increase as India’s nationwide lockdown pushes the economy into its first contraction in decades.

A lawyer for an association of banks also opposed a waiver of interest on loans, citing the need to keep paying depositors despite the moratorium, the people said.

The three-judge bench headed by Justice Ashok Bhushan adjourned the hearing to early August to allow the finance ministry and Reserve Bank of India more time to revisit the issue, the people said.