Blanket interest waiver to cost Rs 6 trillion, Centre informs Supreme Court

Supreme Court will continue to hear the matter today

Interest waiver on all loans during the six-month loan moratorium period will cost over Rs 6 trillion. This may render most banks unviable, the government told the Supreme Court on Tuesday.

The court will continue to hear the matter on Wednesday.

A Bench of Justices Ashok Bhushan, R S Reddy, and M R Shah was informed by Solicitor General Tushar Mehta that this was one of the main reasons why interest waiver was not contemplated and only the payment of instalments was deferred.

The apex court was hearing a batch of pleas from various bodies, including real estate and power, seeking sectorwise relief in view of the Covid-19 pandemic.

Mehta said in the case of State Bank of India (SBI) alone, waiver of six months' interest would completely wipe out over half the lender’s net worth it has accumulated over 65 years of its existence.

Referring to the affidavit filed by the Indian Banks’ Association on September 25, he said SBI has stated that the interest amount from borrowers during the six-month moratorium works out to be Rs 88,078 crore (approximately), whereas the interest payable to depositors during the said period works out to be Rs 75,157 crore (approximately).

Mehta said there are about 8.5 deposit accounts for every loan account in the Indian banking system.