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 banking system 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 Reserve Bank of India (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 non-performing assets (NPAs) will lead to an increase in the level of bad loans to some extent, but it ends the prolonged uncertainty on the issue.
TO READ THE FULL STORY, SUBSCRIBE NOW NOW AT JUST RS 249 A MONTH.
Already a premium subscriber? LOGIN NOW
What you get on Business Standard Premium?
- Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.
- Full access to our intuitive epaper - clip, save, share articles from any device; newspaper archives from 2006.
- Curated newsletters on markets, personal finance, policy & politics, start-ups, technology, and more.
- Pick your 5 favourite companies, get a daily email with all news updates on them.
- 26 years of website archives.
- Preferential invites to Business Standard events.
Subscribe to Business Standard Premium
Exclusive Stories, Curated Newsletters, 26 years of Archives, E-paper, and more!
First Published: Tue, March 23 2021. 22:45 IST