Not in favour of waiver of interest on loans, RBI tells SC

New Delhi, June 04: The Reserve Bank of India has told the Supreme Court that it is not in favour of waiving interests on loans during the lockdown period.

The RBI said that if the interest is waived of it would risk the financial viability of banks.

The RBI made the submission in an affidavit on a petition which objected to the interest on loans being charged by banks.

The petitioner said that the interests on the loans were being charged when the RBI had already announced a moratorium on payment of loan instalments from March 1 till August 31.

"The RBI does not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy," the RBI said in its affidavit.

We have a mandate to secure the interest of the depositors and maintain financial stability as well. For the latter, it is essential that the banks remain financially sound and profitable.

Interest on advances forms an important and vital source of income for banks, which allows banks to sustain and remain financially sound and profitable, the affidavit further read.