Banking sources said that 60 per cent of the borrowers had initially taken advantage of this rebate. But after the relaxation of lockdown, this figure had come down to 40 per cent and below.
The IBA has written a letter to the government asking banks to compensate interest rebate on interest.
The Supreme Court has recently announced a relaxation in interest payments on interest during the loan moratorium period. However, this will be applicable to more than 2 crore loans. At a lesser amount, interest was waived on interest only in November 2020. Sources say that due to the latest decision of the Supreme Court, public sector banks may have to bear a loss of Rs 1800 to 2000 crores. The government has incurred a burden of Rs 5,500 crore in 2020-21 from the Compound Interest Support Scheme during the rebate on installment payments.
Banking sources said that 60 per cent of the borrowers had initially taken advantage of this rebate. But after the relaxation of lockdown, this figure had come down to 40 per cent and below. In the case of corporate, as far as public sector banks are concerned, this figure is at a low of 25 per cent. Sources said that banks will give a rebate in compound interest on the period of exemption for payment of installment. For example, if a customer has waived installment payment for three months, his compound interest will be waived for three months.
Last year, the Reserve Bank had exempted the payment of installments from March 1 to May 31, 2020 on all term loans due to the COVID-19 epidemic. Later this period was extended to 31 August. Sources said that the direction of the Supreme Court is limited to only those accounts which have taken advantage of the payment exemption. According to such rough estimates, public sector banks will get hurt by less than Rs 2,000 crore. Meanwhile, the Indian Banks Association (IBA) has written a letter to the government asking banks to compensate interest rebate on interest. The government will decide on this after considering various aspects.
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