SC Declines To Extend Six Months Loan Moratorium

The Supreme Court (SC) pronounced verdict on loan moratorium case and dec

BY Realty Plus
Published - Thursday, 25 Mar, 2021

SC Declines To Extend Six Months Loan Moratorium

The Supreme Court (SC) pronounced verdict on loan moratorium case and declined to extend the six months loan moratorium, observing further that the waiver of complete interest is not possible. The apex court said that the waiver of complete interest is not possible as it affects depositors. However, it said that any amount collected as compound interest shall be adjusted to the next instalment payable instead of refunding it to the borrower irrespective of the loan amount. Pronouncing its verdict on a batch of pleas by various trade associations, seeking an extension of loan moratorium and other reliefs in view of the Covid-19 pandemic, the Court partly allowed the petitions which had challenged the decision of the Centre and RBI to restrict waiver of interest on interest to certain categories of borrowers who had availed loans of less than Rs 2 crore. The Centre had earlier submitted before the top court that if it were to consider waiving interest on all the loans and advances to all categories of borrowers for the six-month moratorium period announced by RBI, then the amount foregone would be more than Rs 6 trillion. “If the banks were to bear this burden, then it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the lenders unviable and raising a very serious question mark over their very survival,” it had said. Against this backdrop, analysts read the verdict as a mixed bag for the sector. While they believe the Court’s ruling to refund/adjust the compound interest may dent the banks’ earnings in the short-term, the long-term growth outlook, they say, remains intact.