Centre to SC: Blanket waiver of interest big enough to wipe out net worth of banks

New Delhi, Dec 8 : The Centre on Tuesday informed the Supreme Court that it would have to forego more than Rs 6 lakh crore if it was to consider waiving interest on all loans and advances to all categories of borrowers for the six-month moratorium period announced by the RBI in the backdrop of the Covid-19 pandemic.
Solicitor General Tushar Mehta, representing the Centre, said that if the banks were to bear this burden, it would necessarily wipe out a substantial and major part of their net worth, rendering most of the banks unviable and raising a very serious question mark over their very survival.
He added that it may not be possible to give the exact percentage to the borrowers who have not availed the moratorium and have deposited instalments in time, and approximately such class would be more than 50 per cent.
Mehta submitted before a bench headed by Justice Ashok Bhushan that this was one of the main reasons why waiver of interest was not even contemplated and only payment of instalments was deferred.
The bench, also comprising Justices R.S. Reddy and M.R. Shah, was hearing a batch of pleas of big borrowers — from real estate and power sectors — seeking sector-wise relief amid the pandemic.
“If the interest is waived on all the loans and advances for the moratorium period, with regard to all classes and categories of borrowers, the amount to be foregone would be more than Rs 6 lakh crore,” submitted Mehta.