Deferring EMIS will upset the Banks Economy!
Posted on: 11/Oct/2020 1:46:55 PM
The Reserve Bank of India has informed the Supreme Court that deferring the payment of EMIs (Equated Monthly Instalments on loans taken will adversely affect the functioning of the banks – including the prime activities of offering loans, etc.
Lockdown was imposed throughout the country as a preventive measure due to the spread of the raging coronavirus. As such, several industries had to close operations. Plenty of citizens lost their jobs! Giving due consideration to this, the Reserve Bank of India announced that time extension had been granted from 1st March until 31st August to pay the EMIs taken by individual citizens and companies.
However, the banks further announced that interest will be charged for the deferred period given for the payment of EMIs. A section of the people was dissatisfied with this announcement and filed a petition against this in the Supreme Court.
When taking up these petitions for enquiry, the Supreme Court ordered the central government and the Reserve Bank of India to present the recommendations given by the Council headed by Kamath regarding the reformation of the issue of the loan.
In this scenario, in the execution bond (special certificate) presented by the Reserve Bank of India at the Supreme Court, it is mentioned:
The cancellation of charging interest on the interest accrued for the deferred EMI payments will affect the banks’ economy on a huge scale! When the banks undertake activities to compensate the above loss, these may unduly affect the savings account holders.
Nevertheless, the central government has informed that the interest would be paid by the citizens who have taken loans up to Rs. 2 Crores and the interest accrued by the micro/mini/small/medium industries.
Deferment of interest cancellation of the interest charged for the deferred payment would lead to heavy in
As the EMIs for the loans are extended over a period of 6 months, this may create a situation where the banks would be devoid of the additional capital to distribute further loans. This would unduly harm the banks’ operations and adversely affect the economy as well! Further, this activity of deferring payment and availing such concessions may lead to the customers developing inertia on the repayment of loans!
The Supreme Court has released an interim order that the loans on the above category cannot be deemed as irrecoverable loans until further orders,”
The Reserve Bank of India has strongly asserted in the above certificate that unless the above order for the cancellation of the interest on the deferred loan payments, the banking industry may have to encounter severe adverse cononditions.
The views of the Reserve Bank of India as above are reflected similarly in the certificate provided by the central government as well in this regard.
