oppn parties SC Order On Moratorium Will Help The Banking System

News Snippets

  • Calcutta HC says Cricket Association of Bengal is not liable to pay tax on advertisement inisde Eden Gardens cricket ground as it is not a 'public place' because it does not have unrestricted access for the general public
  • Supreme Court admits a plea from a child of a single OBC mother who had applied for an OBC certificate for her son
  • Supreme Court approves applying strict preventive detention laws for 'cybercriminals'
  • SBI likely to shift part of operations of its Global Market Unit from Kolkata to Mumbai
  • FM nirmala Sitharaman calls for a "structured, process-driven approach to compliance" and asks top I-T officials to speed up refunds and simplify processes
  • Marine insurance costs surge as the oil corridor in Strait of Homruz becomes risky due to war
  • Stocks weaken on Monday on global cues: sensex sheds 511 points to 81896 and Nifty 140 points to 24971
  • Former left-arm spinner Dilip Doshi dies in London at 77. He played for India in 33 Test matches and for Bengal in domestic tournaments
  • Pant becomes the only keeper to score two centuries in the same Test in England
  • England Test: Rishabh Pant hits his second ton and KL Rahul a classy century to put India on top, England need 350 runs on the last day, with the ptich showing signs of wear and tear
  • DGCA orders an audit of the entire aviation ecosystem in the wake of recent snags in many flights after the AI Dreamliner crash in Ahmedabad
  • 2 Pahalgam residents arrested by NIA for sheltering and aiding 3 terrorists who killed civilian tourists in pahalgam tell the agency that there were 3 LeT ultras from Pakistan that carried out the attack
  • India unlikely to agree to US demands for lower tariffs on agri products and GM food, trade deal faces fresh hurdles
  • Stocks likely to plummet today as traders will be worried about the effect of US strike on iran, oil price rise and possible inflation. Foreign funds may also withdraw in the volatile global situation
  • Oil prices likely to shoot up as US strikes at iran and the latter decides to close the Strait of Homruz
US President Donald Trump unilaterally announces a 'ceasefire' between Israel & Iran
oppn parties
SC Order On Moratorium Will Help The Banking System

By Linus Garg
First publised on 2021-03-24 08:33:02

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

The Supreme Court, in an excellent decision, refused to extend moratorium on loans allowed by the RBI due to the pandemic. It also refused to allow complete waiver of interest on loans during that period. Finally, it also vacated the restriction it had placed by asking banks not to classify any loans as delinquent after September 2020 if they had not been declared NPAs within August 2020.

The court rightly said that it cannot judge policy decisions of the government or the regulator if they are not prima facie mala fide or arbitrary. This is a welcome observation by the apex court as it means that the judiciary is not willing to step in the executive's domain. Even if the policy decisions of the government hurt some sections, they cannot be taken to court to satisfy that section if they are for the good of all. Complete waiver of interest would have placed banks in a precarious condition as they would have been unable to service deposits or recover costs for running their operations.

However, the court has ordered that compound interest, or interest on interest, collected from any borrower during the moratorium period will have to be e by adjusting it in the next installment. The court has also done away with the Rs 2cr limit the Centre had set for this purpose by calling it arbitrary and irrational. Hence, banks will have to adjust the compound interest collected by them for all big and small borrowers.

The best part of the order is that the banks are now free to classify the loans as per the repayment status after August 2020. This means that many borrowers who were using the SC restrictions to avoid repaying loans will now have to come clean or face being branded as delinquent. This was necessary as the true picture of bad loans in the banking system, post the pandemic and the moratorium, was hidden. Now the banks can assess the situation and move ahead.