The RBI, in a fresh affidavit filed to the Supreme Court, claimed that it is unable to extend loan moratorium beyond the six-month period.
The rationale provided is that such a move “may result in vitiating the overall credit discipline which will have a debilitating impact on the process of credit creation in the economy”. The RBI further said that the move can “increase the risks of delinquencies post resumption of scheduled payments”
The RBI feels the threat is not only to the lenders but also to the borrowers claiming that any extension beyond the six-months would “exacerbate the repayment pressures for the borrowers”.
Previously, the Supreme Court had asked the central government and the RBI to place on record all the notifications and circulars issued till date on loan moratorium in the K V Kamath Committee Recommendations on Debt Restructuring.
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The Supreme Court’s direction came after the finance ministry approved waiver of ‘interest on interest’ of borrowings under specific sectors.
Proposing a more ‘durable solution’, the Resolution
Framework for COVID19-Related Stress announced on August 6, 2020, the RBI said,
‘enables the lenders to implement a resolution plan in respect of personal
loans as well as other exposures affected due to Covid19, subject to the
prescribed conditions, without asset classification downgrade’
In addition, no new relief can be provided in
addition to the one already announced.