Supreme Court order out, D-Street hopes banks will reveal NPAs now

Lenders and brokerages on Tuesday cheered the Supreme Court's much-awaited verdict in the loan moratorium case, after the apex court left it to the Centre and RBI to decide on whether to extend the loan relief to borrowers.

Calling whether to extend the moratorium beyond August 31, 2020, a policy decision, the top court said the government and the central bank would decide on economic policy based on expert opinion. It said a waiver of complete interest is not possible as it would affect depositors. That decision sent banking stocks soaring.

The apex court said no compound or penal interest -- or interest on interest -- will be charged from borrowers for the six-month loan relief period, which was announced last year to ease the financial burden on borrowers due to the COVID-19 lockdowns. The court also said it cannot interfere with the government's decision to fix priorities for relief during the pandemic, which has affected one and all in the country.


Here's how lenders and brokerages reacted to the Supreme Court's much-awaited ruling:

Deepak Shenoy, Founder, Capital Mind:
"This is massive. Does it mean no one will charge interest on interest - so even banks will not pay compound interest on their deposits for 6 months? Everyone means everyone. I think this is an ill-thought-out order, especially when they had 3 months after arguments."

"But hopefully now all NPAs must be revealed as of August 31 onwards as well. This will bring the much needed clarity. 3 months no payment = NPA - that should be the pukka rule (sic)."

Sandip Sabharwal, investment adviser:
"The Supreme Court verdict on the loan moratorium case is on expected lines. Why they had to take 4 months to decide it after reserving it is something that's difficult to understand. Any relief decision would have created huge chaos."

Eshwar Karra, CEO-Kotak Special Situations Fund, Kotak Investment Advisors:
“The SC verdict will throw up a lot of opportunities for special situation funds. A lot of leveraged companies which have an asset:liability mismatch will need to re-tenure their existing loans to match their cash flows. Our $1 billion KSSF fund has the flexibility to give customised solutions for such situations."

Sanjay Tibrewala, CEO, Phoenix ARC:
The Supreme Court (SC) decision is a welcome one. Complete waiver of interest during the moratorium would have badly hurt the balance sheet of lenders and today's SC decision was right in denying that. The lenders can now recognise their NPAs and start taking appropriate corrective action for recoveries."

Satyam Kumar, CEO & Co-Founder, LoanTap:
We welcome Supreme Court’s judgment today as it rejected the plea on total waiver of interest during the moratorium, extension of the period of moratorium among others. This will allow regular functioning of the banking system and ensure the economy continues its course to normalcy."