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Govt may seek details of interest on interest charged by banks
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SME Times News Bureau | 24 Mar, 2021
Government may ask banks to provide details of interest on interest collected by them for loans exposure of over Rs 2 crore.
This
follows the Supreme Court's observation given on Tuesday where it noted
that the RBI and the government have not provided any rationale for the
overall borrower's debt cap of Rs 2 crore for waiver of interest on
interest and directed them to provide such relief to borrowers with
overall exposure of over Rs 2 crore as well.
Sources said that
the government wants to collect individual bank data to assess the total
liability on the sector to reimburse interest on interest collected on
loan exposure over Rs 2 crore for the period between March-August 2020.
This would help it in devising a plan how to reimburse such interest for
borrowers who have exposure of over Rs 2 crore with banks.
Initial
thinking, said sources in the know, is to look at 50-50 sharing of
remaining repayment liability between the Centre and the banks. This
would reduce burden on both.
Some bankers have also suggested
that IBA/RBI/Government should file a writ petition challenging the
court directive to waive interest on interest on loans above Rs 2 crore
(except for consolidated exposure).
Centre had last year agreed
to credit in the accounts of eligible borrowers the difference between
compound interest and simple interest collected on loans of up to Rs 2
crore after the matter reached the Supreme Court.
As per
brokerages report, the company's interest across all lenders is around
Rs 14,000 crore. Excluding the relief for loans upto Rs 2 crore
(estimated to cost around Rs 6,500 crore), an additional relief of about
Rs 7,500 crore will need to be provided to borrowers.
Under the
series of pandemic relief measures, the RBI had on March 27, 2020
issued the circular which allowed lending institutions to grant a
moratorium on payment of instalments of term loans falling due between
March 1, 2020, and May 31, 2020. Later, the moratorium was extended
till August 31 this year. However, the same had to be repaid after the
moratorium, including payment of compounding interest (interest in
interest) on dues for the said period. This was challenged in the court.
For
centre, settling this Rs 7,500 additional burden would pose a challenge
as its finances are already overstretched given the stimulus measures
and less than anticipated levels of revenue collections in wake of the
pandemic. For banks also it would mean further strain on their finances
as already their NPA level is expected to shoot to post lifting of
restriction on accounting for loans turning into NPA post imposition of
moratorium on loan repayment.
"The sharing of the liability
between the Centre and banks would reduce the load but the court could
be re-approached to give a relook at the matter as earlier relief was
meant for MSMEs and small borrowers that were affected the most during
the lockdown," said a banking sector analyst asking not to be named.
It
is estimated that NPA may rise by over one per cent after banks start
recognising loans that were extended moratorium last year.
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