The Finance Ministry in an affidavit has informed the Supreme Court that a waiver of interest on interest during moratorium would go against the basic canons of finance, and the August 6 RBI circular permitted lenders to allow a moratorium of up to two years.
The Ministry in the affidavit said: “The resolution plans may inter alia include rescheduling of payments, conversion of any interest accrued, or to be accrued, into another credit facility, or, granting of moratorium, based on an assessment of income streams of the borrower, subject to a maximum of two years.”
It added that the moratorium period, if granted, shall come into force immediately upon implementation of the resolution plan.
The ministry said with the August 6 RBI circulars, banks were fully empowered to resolve Covid-related stress and customise relief to individual borrowers through grant of various concessions in terms of: “(i) alteration in the rate of interest and haircut on amount payable as interest; (ii) extension of the residual tenor of the loan, with or without moratorium, by up to two years; (iii) waiving penal interest and charges; (iv) rescheduling repayment; (v) converting accumulated interest into a fresh loan with a deferred payment schedule; and (vi) sanction of additional loan.”
The Ministry said the RBI circulars take care of the MSME sector, personal loans and corporate loans, keeping in mind the overall financial stability of the economy, economic stability of the banking sector and interest of the depositors in mind.
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