Waiving interest on interest

With the Indian economy yet to recover from the slowdown induced by the Covid-19 pandemic, registering a massive contraction in the first quarter of this fiscal, the directive of the Supreme Court to the Centre, the RBI and banks to come together to chalk out sector-specific schemes to restructure loans is timely. The court has asked that accounts not declared NPA till August 31 shall not be declared so till further orders and wants clarity on the charging of interest on deferred EMIs during the moratorium. The court stance implies that the government and financial institutions need to get into the nitty-gritty of the issue and not confine themselves to mere semantics. Nearly six months into the lockdown, it is time to take concrete steps to rejuvenate the economy — sector by sector — through measures that help reinvent and meet the challenge posed by the exigency, ensuring that the benefit percolates to the intended segment, whether it’s business or the ordinary consumers. Considering that the economy is yet to open up fully, the task is well cut out.

Growth had been affected even before the onset of the pandemic, attributed mainly to demonetisation and the rolling out of GST. That it took time to streamline meant hardships for the business class and the common people alike. The gains from the moratorium announced by the RBI also need to be assessed. Asking now for interest on deferred payment will mean a failure to have read the fine print, a setback for those who availed it amid this crisis.

Earlier, there had been a run on some private sector banks and the RBI had to intervene. Public sector banks also have NPAs on account of bad loans which affect profitability. The recent merger of banks was undertaken for recapitalisation. But infusing funds also means an increase in deficit which leads to more borrowings. The health of the financial institutions is vital for the economy, but equally important is protecting the lender and the borrower in these circumstances while acting against the wilful defaulters.

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