Team News Riveting
The decision of the Narendra Modi government to waive “interest on interest” for the moratorium period on loans upto Rs 2 crore would put a burden of Rs 5,000 to 7,000 crore on exchequer.
In a major relief to thousands of individuals and MSME borrowers, the Centre in an affidavit informed the Supreme Court that it had taken a decision to waive “interest on interest” on loans up to Rs two crore during the six-month moratorium period.
The affidavit said the only solution was that the government should bear the burden resulting from waiver of compound interest.
“After careful consideration and weighing all possible options, the respondent Union of India has decided to continue the tradition of handholding the small borrowers”, said the Centre.
The categories of loans up to Rs two crore include MSME loans, education loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professional and consumption loans.
Rating agency ICRA said assuming not more than 30-40 per cent of the overall loans of the banks and NBFCs would be eligible for relief, the cost to the government should not exceed Rs 5,000-7,000 crore.
There would be a minimal impact on profitability of lenders as the government had intent to absorb the cost of the waiver.
In an earlier estimate by Macquarie Capital, it was suggested that waiving off the entire interest during the moratorium period could cost banks nearly Rs 15,000 crore.
Meanwhile, the ministry of finance on Saturday said that September data had shown “credible signs” of economic growth.
In a statement, it said during the last six months of COVID-19 crisis, while pushing the fiscal stimulus and packages to boost recovery process of the economy it has taken every possible measure to address the concerns of all the stakeholders and the citizens and has progressively extended help on both the demand and supply side to bring the economy back on track.
