90% borrowers didn’t defer EMI: SBI to Supreme Court

NEW DELHI: State Bank of India, the largest bank in the country, told the Supreme Court on Wednesday that 90% of borrowers did not avail the moratorium till August 31 on repayment of loans through EMI to question the brouhaha caused by PILs over waiver of interest on interest accrued on deferred EMIs.

Appearing for SBI, senior advocate Mukul Rohatgi said, “Nearly 90% of borrowers have not availed the moratorium and are paying their EMIs regularly during the lockdown period. If on one hand the compound interest in deferred EMIs are not charged from borrowers, and on the other hand the banks are bound to pay compound interest on depositors' money, how will the banks survive?”

The bench said it was not asking for waiver of interest during the moratorium period, but asking the finance ministry, the Reserve Bank of India and banks to consider waiving interest on interest that would accrue on the deferred EMIs. Solicitor general Tushar Mehta said moratorium did not mean either waiver of interest or interest on interest but it was decided not to levy penalty on delayed EMIs.

“The RBI has taken a stand (that it would be imprudent to waive interest on interest which would cause havoc in the banking industry). It is now for the banks to take an appropriate decision. Banks are under obligation to pay interest on deposits,” Mehta said.

The bench, which had been asking the finance ministry to take a decision on the ‘interest on interest’ issue, told the SG, “You (the Centre) don’t appear interested in helping borrowers who faced tough times during the lockdown. You cannot throw up your hands and say it is for the banks to decide. When thousands and thousands of crores of rupees are defaulted, you come out with a rescue plan. Now, for this narrow issue of ‘interest on interest’, you talk of adverse impact on banks and the economy. We are aware of the problem due to the pandemic. There has to be some benefit to the borrower otherwise what is the purpose of this moratorium.”

Senior advocate Harish Salve, appearing for the Indian Banks' Association (IBA), sidestepped the contentious issue by arguing that banks had not calculated the impact of the revenue shortfall. “We cannot be taking defaulters to liquidation as we know most industries are doing badly except Netflix and telecom companies. So, let the issue be deferred for three months to see whether we come out of the Covid tunnel. Then, we can have a realistic picture before us to debate the issue,” he said.

Appearing for the petitioner, senior advocate Rajiv Datta criticised the indecisiveness on the issue of ‘interest on interest’ but the bench said it would take up the matter afresh in the first week of August.