InvestorQ : Why is the CII President Mr. Uday Kotak against offering interest waiver to borrowers for the COVID-19 period?
Anjana Aiyar made post

Why is the CII President Mr. Uday Kotak against offering interest waiver to borrowers for the COVID-19 period?

Answer
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Arya Nanda answered.
4 months ago


Uday Kotak at a recent press conference had said that interest waiver may not be a wise option at the current juncture. It may be recollected that the Supreme Court had sought an explanation from RBI on why interest waiver should not be granted instead of EMI moratorium. At that time, RBI cited credit quality concerns, which Uday Kotak also concurs. Currently, the banks are offering an EMI moratorium wherein interest will not be charged up to Aug-20. All pending amounts will have to be cleared by March 2021. On the other hand, in a wavier the bank writes off part of the loan liability and it is an actual loss for the bank. In fact, many banks have even objected to the idea of EMI moratorium. The worry is that with over 30% opting for moratoriums, the extent of problems may be clear only at the end of 6 months, which is bad enough. By opting for waivers, it would actually crunch interest earnings by half for the banks and would actually be unviable.