The Union government is set to pass on the benefits of the compound interest waiver to small borrowers before November 2.
Banks, on the other hand, have started making additional provisioning based on their own judgment of the loan books in balance sheet for the second quarter following the Supreme Court’s standstill order on classifying loans as non-performing assets (NPA).
“We are putting all our efforts to ensure that we pass on compound interest waiver to borrowers before the SC deadline,” a top government official said, requesting anonymity.
Both state-owned and private lenders will be asked to refund the compound interest waiver sum to all borrowers, with loans up to Rs 2 crore, before November 2 and file a claim with the government subsequently. However, the government is likely to frame a scheme that will spell out the modalities to be followed by lenders. It will be applicable to all borrowers — irrespective of whether they availed moratorium or not but the calculation of computing waiver by banks may vary according to the type of loan.
It will tentatively cost around Rs 6,500 crore to the Central government. After getting the Cabinet’s nod, the government will seek authorisation from Parliament in the winter session for making appropriate grants towards waiver of compound interest, following which it may start transferring money to the banks based on their claims.
The Supreme Court, which is hearing a batch of petitions seeking waiver of interest on loans during the RBI’s six-month moratorium announced in March, had directed the government to tell the progress of compound interest loan waiver by November 2.
On September 3, the SC had asked banks not to classify loans that were standard or stressed till August 31 as NPAs till further order. Banks have started finalising their balance sheets for July-September period and have made additional provisioning towards possible NPA. They are being termed as either accelerated or Covid-related provisioning but experts felt that the second quarter results of banks may not reflect true picture of their asset quality or profitability.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard