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  5. Interim relief from Supreme Court on loan moratorium — says banks must not declare accounts as NPAs for two months

Interim relief from Supreme Court on loan moratorium — says banks must not declare accounts as NPAs for two months

Interim relief from Supreme Court on loan moratorium — says banks must not declare accounts as NPAs for two months
Finance1 min read

  • India’s top court has hit pause on moratorium loans being declared NPA if they weren’t bad loans as of August 31.
  • Justice Ashok Bhushan announced that no account will be NPA for 2 months and restricted banks for taking action against borrowers, which may be coercive in the interim verdict.
  • The Supreme Court’s next hearing on the matter will occur on September 10
The Supreme Court hasn’t directly extended the moratorium on repayment of loans but it has hit pause. If a borrower’s account wasn’t NPA as of August 31 then banks aren’t allowed to call it a bad loan until India’s top court announces its verdict on pleas seeking the extension of moratorium and the waiver of accruing interest.

“No account will be NPA for 2 months and the banks should not take action against borrowers which is coercive. We have to protect them,” said the bench led by Justice Bhushan.

Solicitor General Tushar Mehta argued against the waiving of interest and explained that for those individuals who opted for the moratorium, they won’t be defaulters immediately even if they can’t make their payments. “When an account becomes NPA — it happens when one fails to pay for 90 days. The ‘freezing period’ of moratorium stands excluded,” he said.

Even without the Supreme Court interim order, moratorium accounts will only become NPA if no payments are made for another three months.

The Supreme Court will re-commence hearing on September 10.

(developing story)

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