Banks Will Ask Govt To Waive Off Compound Interest Rates; Rs 7500 Cr Needed
Banks will approach the government to cover the costs of compound interest waivers. The figure is estimated to be around Rs 7,500 crores.
Burden on Consumers
An insider source has said that if banks themselves were to foot the bill their profitability could be hampered.
The government had communicated with the apex court in October that if banks were to bear the burden of interest waivers, consequently it is the depositors who will have to pay the price.
Earlier this week the Supreme Court ruled that the privilege of compound interest or interest on interest waivers should be extended to all borrowers regardless of the amount of outstanding loan.
Repayment Ambit Widened
Earlier compound interest waiver would be extended to only retail and small business loans of up to Rs 2 crore, affecting interest payments during the moratorium period of March to August 2020.
Micro, small and medium enterprises (MSMEs), education loans, housing, consumer durables, credit card dues, auto loans, personal and professional loans and consumption loans came under its purview.
The Supreme Court observed that there was no rationale to limiting reimbursement relief to only the aforementioned entities.
RBI had postponed repayment in light of debtors who were financially adversely affected during the Coronavirus crisis. Many had lost their jobs and savings.
The source has also predicted that even if the government steps in, the bill shouldn’t actually be that high .
The matter will be taken up with the Indian Banks’ Association (IBA) in an upcoming committee meeting.
However no one is really able to predict if the government will accede to the demands.
Back in October a compound interest payment waiver of Rs 6,500 crores was announced in a first round.
SBI was to bear responsibility of processing all such claims.
The deadline stated for submission of claims by lenders was 15 December.
Non-banking financial companies (NBFCs) are still awaiting their share of reimbursements from the first round.
It seems not everybody has yet been reimbursed but industry insiders are expecting the procedure to take time.
How Many Claims Did SBI Receive?
An RTI claim was filed by news agency Mint seeking information on the number of reimbursement claims received by SBI, the agency appointed for processing and settlement of refund claims.
SBI refused to submit related information which it stated was exempted from disclosure under Section 8(1)(d) of the RTI Act 2005.
So an appeal to the decision was also waived off.