Granting interest waiver, in addition to deferment, will amount to discrimination among borrowers who decide to avail the RBI’s loan moratorium and others who don’t The Supreme Court was against burdening customers with a loan trap while hearing a Public Interest Litigation (PIL) filed by one Gajendra Sharma, demanding a “waiver on interest charged” by a bank citing the relief given by the Reserve Bank of India (RBI) on the payment of equated monthly installments (EMIs) during March and August 31 due to the pandemic. A three-Judge Bench of the Supreme Court observed: “There is no merit in burdening customers, who have opted for the RBI-approved loan moratorium, with additional interest. Once you fix a moratorium it should serve the purpose...
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Category: Money, inflation & interest rate
Moratorium – no guarantee for interest waiver
On March 27, 2020, the Reserve Bank of India [RBI] governor, Shaktikanta Das announced a comprehensive action plan to resuscitate the economy devastated by the Corona virus. Apart from measures to inject liquidity in the financial system, increase in availability of credit and reduce the cost of capital, the plan sought to ease the stress of loan repayments on businesses and individuals. Amongst others, this includes 3-month moratorium on payment of installments in respect of all term loans outstanding on March 31, 2020. Even as the lockdown continued much longer than it was initially envisaged [there were three extensions after the first phase announced by Prime Minister, Modi on March 24, 2020] on May 22, 2020, the governor announced extension...
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Much ado about nothing
Faced with a steep decline in its revenue and increase in expenditure commitment, the Modi Government has opted for a package which is dependent on loans After a long wait of about seven weeks, since the nationwide lockdown began on March 25, Prime Minister Narendra Modi announced the ‘Atmanirbhar Bharat Abhiyan’, a special package of Rs 20,00,000 crore, about 10 per cent of the Gross Domestic Product (GDP), to revive the economy. Finance Minister Nirmala Sitharaman unveiled the details in five tranches during press conferences held between May 13 and 17. The package aims at giving relief to all strata of society impacted by the sudden stoppage of economic activities viz. farmers, workers, migrant labourers, micro, small and medium enterprises (MSMEs), vendors,...
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Stimulus package – much ado about nothing
After a long wait of about 7 weeks since the nation-wide lockdown on March 24, 2020, Prime Minister, Narendra Modi announced on May 12, 2020 ‘Atmanirbhar Bharat Abhiyan’, a special economic and comprehensive package of Rs 2000,000 crore, about 10% of gross domestic product [GDP], to revive the economy. The finance minister, Nirmala Sitharaman unveiled the details in 5 tranches during press conferences held on May 13 – 17, 2020. The package aims at giving relief to all strata of the society impacted by sudden stoppage of economic activities viz. farmers, workers, migrant labor, micro, small and medium enterprises [MSMEs], vendors, small merchants, self-employed, middle class etc. Given its mega size, an immediate question that comes to mind is whether...
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States must make realistic demands
They should assess the amount needed for April-June, consider what is being given by the Centre and if more is still needed, seek incremental funds only Even as corporates, MSMEs, informal sector workers and others impacted by the pandemic are demanding relief packages from the Centre, the States, too, have given the Government their wish list and five States have collectively sought close to Rs 2,25,000 crore. While Maharashtra has asked for Rs 50,000 crore, Chhattisgarh wants Rs 30,000 crore, Kerala, Rs 80,000 crore, Rajasthan Rs 40,000 crore and West Bengal has demanded Rs 25,000 crore as immediate compensation for the revenue loss suffered because of the nationwide lockdown. Rajasthan Chief Minister, Ashok Gehlot has also proposed setting up of...
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Battered states, bloated demands
Even as corporate, small, medium and micro enterprises [MSMEs], tens of million workers in the informal sector, self-employed and all others impacted by the Covid-19 pandemic are demanding relief package from the union government, the states too have pitched in with a volley of demands which have huge financial implications. This came to the fore during a video-conference held by the Prime Minister, N Modi with chief ministers on April 26, 2020 to discuss the exit strategy after the current lock-down ends on May 3, 2020. Five opposition ruled states have sought close to Rs 225,000 crore: Maharashtra, Rs 50,000 crore ; Chhattisgarh, Rs 30,000 crore; Kerala, Rs 80,000 crore; Rajasthan, Rs 40,000 crore and West Bengal [WB] Rs 25,000...
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Don’t expect the moon
The RBI has given a boost to the economy in these testing times. But India Inc. argues that this won’t be of help in the absence of demand. This is flawed thinking On March 27, in a bid to resuscitate the economy devastated by the Coronavirus, the Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced a host of measures to inject liquidity into the country’s financial system; reduce the cost of capital and ease the stress of loan repayments. These included reduction in policy rate by 75 basis points to 4.4 per cent; a three-month moratorium on payment of installments in respect of all term loans outstanding on March 31; relaxation in the norms for cash credit and working capital limits;...
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RBI booster dose – will it work
In a bid to resuscitate the economy devastated by the Corona virus, on March 27, 2020, RBI governor, Shaktikanta Das announced a host of measures to inject liquidity in the country’s financial system; reduce the cost of capital and ease the stress of loan repayments. These included (i) reduction in policy rate [interest rate charged by the apex bank on loans given to banks] by 75 basis points to 4.4%; (ii) 3-month moratorium on payment of installments in respect of all term loans outstanding on March 31, 2020; (iii) relaxation in the norms for cash credit and working capital limits; (iv) reduction in cash reserve ratio [CRR] [portion of deposits, banks are required to keep with RBI] by 100 basis points...
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Coronavirus scar to haunt economy for long
In a span of less than a week, there have been three sets of official announcements enumerating the measures to alleviate the problems faced by industries, businesses and workers due to the economic disruption caused by COVID-19. The first two were made by Finance Minister Nirmala Sitharaman on March 24 and 26 and the third by the RBI Governor Shaktikanta Das on March 27. On March, the FM announced reliefs for industries and businesses which are largely ‘procedural’. These include extending the date for filing returns [income-tax, GST, customs, excise and statutory filings under Companies Act], reducing interest chargeable on delayed payments, exemption from penalty, increasing threshold of filing under the Insolvency and Bankruptcy Code [IBC] etc. The firms have...
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A mixed bag
While some of the relief measures announced by the FM are just financial jugglery, the remaining items offer some concrete benefits to the poor In his address to the nation on March 19, Prime Minister Narendra Modi announced the setting up of an Economic Response Task Force (ERTF) under the Union Finance Minister (FM), Nirmala Sitharaman to come up with a package of measures to alleviate the problems faced by industries, sectors, businesses and workers due to the economic disruption caused by Covid-19. The most seriously affected sectors, such as aviation, transport, hospitality, tourism, retail, micro, small and medium enterprises (MSMEs), are looking for a host of concessions such as additional interest subvention (for instance, MSMEs are demanding three-five per...
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