Concerning the borrowers under Micro, Small, and MediumEnterprises (MSME), the government went ahead and took on its shoulders the lossof interest to be earned on the interest payments missed due to the six-monthmoratorium which was decided due to the COVID-19 and its fallout where almostevery business was stalled.
Initially, the government denied any such waiver becausedoing so would have hurt the survivability of the banks underwriting the loans.Upon intervention of the Supreme Court, and its guidelines to consider thesituation and help the borrowers, the government came up with a plan.
The rationale put forward by the government when theborrowers were given permission to seek a six-moratorium on all loans due tothe pandemic was that the lending institutions’ survivability would have becomea question if they went along with the proposal.
Thus, the lenders – banks andhousing finance companies - continued to charge interest on the entire amounti.e. the principal and the expected interest payment during the moratorium.
If all the categories of the borrowers were given therelief, then the amount would be about Rs 6 lakh crore. Such an amount woulddeal a severe blow to the net worth of the banks. However, if the benefit was extendedto a select list, then about Rs 2 lakh crore will be the burden on the banks.
The loans taken under the sectors education, housing, consumerdurables, credit card dues, auto, consumption, and personal loans toprofessionals will receive the benefit of not having to pay interest oninterest.