Finance Ministry constitutes expert committee to look into loan moratorium concerns

The finance ministry has constituted an expert committee to look into the matter of waiver of interest or the interest on interest for loans under moratorium.
The three member committee included Rajiv Mehrishi, former Comptroller and Auditor General of India, Ravindra H Dholakia, former monetary policy committee member and B Sriram, former managing director, State Bank of India (SBI), according to a ministry statement on Thursday.

The development comes as the matter is being heard in the Supreme Court (SC), which ordered an interim extension till September 28, of the Reserve Bank of India (RBI) mandated loan moratorium which ended in August.

The committee will submit its report within a week and will be assisted by SBI in a secretarial capacity, the statement said. The committee may also consult banks or other stakeholders if required.

The apex court gave the Centre, the RBI and banks two weeks to file a ‘concrete’ response after ‘holistically’ considering the interests of all classes of creditors and all sectors of the economy, while observing that it was keen to grant the waiver.

Apart from the waiver of interest, the committee's remit also included coming up with suggestions to mitigate financial stress on various sectors of the economy and how they can be adopted, the statement said.

Earlier on September 3, the three judge SC bench headed by Justices Ashok Bhushan and comprising R Subhash Reddy and MR Shah, had ordered that no loan accounts shall be declared non-performing assets (NPAs) if they were not NPAs at the end of August.

The bench was hearing a clutch of petitions filed by various stakeholders like the real estate sector and individual borrowers, seeking waiver of interest accumulated during the six month moratorium from March to August.

The stand of the petitioners was that businesses are facing pressure of downgrades on their loan accounts after the lifting of the moratorium while individual borrowers were ‘suffering’ due to the pandemic and were in no position to pay the accrued interest.

The Centre’s argument was that banks are an integral part of the economy and an interest waiver would adversely impact their balance sheets.