Loan moratorium: SC ruling clears overhang for banks, sets path for action

Liability seen at Rs 8,000 cr if govt does not foot the bill; more transparency expected, loan recoveries to start

Banking stocks rallied on Tuesday after the Supreme Court refused to extend the six-month loan moratorium and allowed banks to tag accounts that have not been paying EMIs since August-end as non-performing assets (NPAs). The judgment clears a major overhang for the sector and that is fuelling the optimism, said experts.
 
The Nifty Bank index was up 1.73 per cent, and all its constituents were in the green, barring one.
 
The ruling provided relief for borrowers as well. The SC said banks cannot charge interest on interest for the moratorium period and the amount so collected must be