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Judicious decision

SC judgment will end uncertainty in the banking system

Topics
Supreme Court | Loan repayment | debt restructuring scheme

Business Standard Editorial Comment  |  New Delhi 



The Supreme Court’s refusal to extend the loan moratorium period and a total waiver of interest payments is a big relief for both the and the government. An interest waiver on this scale would have significantly impaired the banking system, with wider macroeconomic consequences. The government had earlier submitted before the court that if it were to consider waiving interest on all loans for the six-month moratorium period announced by the (RBI) in view of the pandemic, the amount foregone would be more than Rs 6 trillion. If banks were to bear this burden, then it would wipe out a substantial part of their net worth, rendering most lenders unviable and raising serious doubts about their survival. The decision to lift the stay granted on classification of (NPAs) will lead to an increase in the level of bad loans to some extent, but it ends the prolonged uncertainty on the issue.

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First Published: Tue, March 23 2021. 22:45 IST

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