Friday, August 19, 2022
154,225FansLike
654,155FollowersFollow
0SubscribersSubscribe

RBI tells Supreme Court extending moratorium will result in significant economic cost

Want create site? Find Free WordPress Themes and plugins.

New Delhi (ILNS): The Reserve Bank of India (RBI), in an affidavit submitted to the Supreme Court, has said that it cannot extend the moratorium period allowed by the government (prodded by the top court) to borrowers, because it will entail significant economic costs which cannot be absorbed by the banks without serious financial strain, which in turn will have huge implications for the depositors and the broader financial stability.

These included loans up to Rs 2 crore for MSMEs loans and personal loans up to Rs 2 crore.

Highlighting the extension of the moratorium the RBI submitted: “Long moratorium exceeding six months can also impact credit behavior of borrowers and increase the risks of delinquencies post resumption of scheduled payments. It may result in vitiating the overall credit discipline which will have a debilitating impact on the process of credit creation in the economy. It will be the small borrowers which may end up bearing the brunt of the impact as their access to formal lending channels is critically dependent on the credit culture.”

Explaining its Resolution Framework, the RBI pointed out that it has accepted the Kamath committee’s recommendations relating to financial parameters, along with the sector-specific benchmark ranges for such parameters, to be factored into each resolution plan.  

The RBI has further submitted that it had announced the Resolution Framework for COVID 19-related Stress on August 6, 2020 with a view to providing the lenders a more durable mechanism to address the financial stress faced by the borrowers on account of COVID 19. It was a conscious policy decision to restrict the dispensation to only those accounts which were regular in making payments before the onset of the pandemic and which got impacted on account of Covid19.

The RBI said measures have been aimed at reducing the cost of credit for the borrowers and are expected to aid in improving demand. The RBI said: “The travails of the real sector cannot be solved through banking regulations. The banking regulations of RBI cannot substitute the address of structural problems of the real sector.”

-India Legal Bureau

Did you find apk for android? You can find new Free Android Games and apps.
spot_img

News Update