Asking banks to waive interest will adversely impact financial system: Govt

 

Solicitor General Tushar Mehta told the three-judge Bench that waiving interest or granting a blanket moratorium on repayment of loans will be a "knee jerk reaction".

The finance ministry and the Reserve Bank of India (RBI) told the Supreme Court on Wednesday that banks are playing a crucial role in reviving the economy. Hence, asking them to take a hit on interest rates will adversely affect the financial system as well as economic growth, the apex court was told.

Arguing on behalf of the Centre and the RBI, Solicitor General Tushar Mehta told the three-judge Bench that waiving interest or granting a blanket moratorium on repayment of loans will be a “knee jerk reaction” and not in the best interest of the economy.

The apex court said it will hear the matter again on Thursday even as a number of sectoral bodies joined hands with the original petitioner demanding waiver of interest, or waiver of interest on interest on the suspended monthly instalments during the moratorium period.

These included real estate bodies from various states, hotel associations, Association of Power Producers, and bodies representing shopping centres and malls, among others.

The Bench was hearing a plea, challenging levy of interest on loans during the moratorium period.

The plea, filed by Agra resident Gajendra Sharma, sought a direction to declare the portion of RBI’s March 27 notification as something beyond the RBI’s legal power or authority. That is, to the extent it charges interest on the loan amount during the moratorium period. It said this creates hardship to the petitioner, being the borrower, and is a hindrance and obstruction in ‘right to life’ guaranteed by Article 21 of the Constitution of India.