RBI opposes waiver of interest on loan in Supreme Court
The Reserve Bank of India (RBI) has told the Supreme Court that it is not in favour of waiving interest on loans during the lockdown period as it will risk the financial viability of banks.
The banking regulator made this statement on affidavit in response to a PIL filed by a borrower Gajendra Sharma who objected to the interest on loans being charged by banks when the RBI had already announced a moratorium on payment of loan instalments from March 1 till August 31. The apex court had issued notice on Sharma’s petition on May 26.
The RBI in its response said, “The RBI does not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy.”
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The RBI stated that it has a mandate to secure the interest of depositors and maintain financial stability as well. For the latter, it is essential that the banks to remain “financially sound and profitable”. “Interest on advances (loans) forms an important and vital source of income for banks, which allows the banks to sustain and remain financially sound and profitable,” the RBI affidavit added.
The petitioner had approached the Court claiming that since the lockdown is in place, there was no means for citizens to earn a livelihood. Sharma had an optical shop in Agra, Uttar Pradesh, and had availed a home loan of over Rs 37 lakh from ICICI Bank. He argued that the “imposition of interest (by banks) during the moratorium period is completely devastating and wrong”.
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