Loan moratorium: Government flip-flops in full play

The Modi government’s prevarication on the issue of loan moratorium during the COVID-19 pandemic has been evident right through. Every time the issue came up before the Supreme Court, which assumed a proactive role in bringing relief to those affected, the government has been shifting the goal posts as part of its evasive strategy.

After so many tortuous arguments, the government has finally – or so it seems as of now – agreed to waive compound interest on instalments of loans up to Rs 2 crore payable during the six-month moratorium period of March 1 to August 31 by November 15. And yet the court could not disguise its bewilderment as to why the government needed more than a month to implement the decision.

The government claims it requires time to take care of the varying terms and interest rates for the various types of loans and as such necessary mechanisms have to be put in place for implementing the decision. But going by past flip-flops, it is still doubtful whether the government would keep its word.

For, the government kept advancing all kinds of excuses for not honouring such a commitment as the hearing on the case progressed in the Supreme Court. And the court consistently expressed its displeasure over the dithering. At one stage, the government even argued that neither the Centre nor the RBI is in a position to intervene as it is up to the lending institutions to take a call.

The government claimed that it was not possible to provide more relief to different sectors under the COVID stimulus package, if at all there was one worth the name, and even challenged the authority of the Supreme Court to deal with issues of economic policy.

In an affidavit, it asserted that policy is the domain of the government and that courts should not go into sector-specific financial relief. Any further relief, besides waiving of compound interest for loans up to Rs 2 crore, would be detrimental to the national economy and banking sector, it claimed.

But even this argument came rather as an after-thought. Otherwise, the government could have told the court to keep away as soon as it came up for its consideration. It would have helped avoid all the twists and turns, but obviously the government did not have the moral courage to take such a stand as considered policy.

Even with regard to the latest promise of a solution by November 15, the government claims it has to compensate the banks for the loss they would suffer due to the write-down. This too is a specious argument as the pandemic had actually provided the banks with an opportunity to make a kill as the loan-takers would have in any case defaulted.

It is nothing less than scandalous that the government treats the banking sector as a holy cow. The COVID pandemic has turned the world upside down and there is hardly an area that has not been affected by its impact. The pandemic is expected to lead to the worst recession since the Great Depression of the 1920s. It is estimated that COVID lockdown would result in a cumulative output loss of $12 trillion to the global economy this year and the next. Millions of workers have lost their means of livelihood, with the crisis not sparing even the giants.

The pandemic has necessitated sacrifices by not only economies, but political order, value systems and even finer spheres like human rights and democracy. Why should then only Indian banks be spared from the COVID impact?

In fact, the Modi government has been using the pandemic to make money under the guise of fighting the virus. COVID cess has been introduced in certain retail sales and petroleum products been subjected to cruel excise hikes.

So, it is obvious that the government is seeing a huge opportunity loss in the banking sector, where interest on interest would have added significantly to their coffers, but for the persistent intervention by the Supreme Court. After all, the major banks are all owned by the government and any new accruals to the banks’ kitty would obviously reflect in government finances.

It is a matter of great relief to the common man that the Supreme Court has taken upon itself the task of protecting the interest of the public, which the government has miserably failed to uphold.