Global brokerage Morgan Stanley stated that it will await more clarity on the interest waiver after the Supreme Court ended the blanket ban on classification of non-performing assets (NPAs) on Tuesday (March 23). The apex court, in its order, said that the interim relief granted earlier to not declare the accounts of respective borrowers as NPAs stood vacated.

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The brokerage firm added that it would await clarity on whether additional liability would be funded by the government as well.

Morgan Stanley believes that the SC judgment is a net positive as it will help recognise bad loans soon. The note added: “Also, believe the Supreme Court's judgment will help improve the recovery run rate in the future.”

In an order on March 24, the apex court had stated that the government cannot be directed to ask banks to waive off interest on loans provided during the lockdown. The order added that the moratorium on equated monthly instalments for repaying those loans could not be extended beyond August 31, 2020.

The SC order stated: “There shall not be any charge of interest on interest/compound interest/penal interest for the period during the moratorium from any of the borrowers and whatever the amount is recovered by way of interest on interest/compound interest/penal interest for the period during the moratorium, the same shall be refunded and to be adjusted in the next instalment of the loan account.”

https://www.barandbench.com/news/litigation/waiver-interest-on-interest-loan-moratorium-supreme-court-rbi