SC’s compound interest waiver may have impact of Rs 7,000 crore: Analysts. The Supreme Court on Tuesday told the lenders that they could not charge interest on the loans of all borrowers granted suspension between March and August 2020 and said the lenders must repay the loan or the money should be repaid with the lenders. Refunds or adjusted amounts may range from Rs 7000 crore to Rs 8000 crore, estimates agencies and analysts said.
Earlier, following a Supreme Court order, the government had already repaid interest rates on all borrowers of less than $ 2 million.
The total cost of disbursement in the financial sector is estimated at R14,500 million when the Rs 6 500 crore was paid off by the government with a loan of less than Rs 2 crore.
“According to our estimates, the combined interest for the six-month suspension of all lenders is estimated at Rs 13,500-14,000 crore,” said ICRA.
ICRA said that goI has already announced the release of 2 rore crore loans which could cost about 6500 rupees to pay. With the announcement of the withdrawal of all borrowers, an additional 7000-7500 assistance will need to be provided to borrowers.
Kajal Gandhi who is the vice president of ICICI Direct, said the new impact on banks would be Rs 7,500 to 8,000 crore.
Gandhi said that this decision removes any uncertainty that may arise as a result of the extension. Our estimates suggest an additional burden of 7,500 to 8,500 million rupees on banks.
Siddharth Purohit who is an analyst at SMC Global said that in all it is a good thing for banks as full interest rates are being raised.
The State Bank of India, the country’s largest bank, said loan applications had been received at R1 181 crore which was 10% of the balance.
The Supreme Court ruled that the interest rate could not be deducted permanently and that the decision was based on an extended period of more than six months. It said no signal could be given to the government or the RBI to announce any specific financial pension or assistance, and said it would not be able to issue aid specifications in certain areas.
A bench comprising judges D Y Chandrachud, M R Shah and Sanjiv Khanna ruled on a loan cut and interest termination.
Following a nationwide announcement in March last year, the Reserve Bank of India announced a three-month loan term cut, which was later extended for another three months until August. The RBI also included a suspension clause on loans under suspension as banks were not allowed to change the dividend of those loans at the time of suspension.
In September, the Supreme Court asked the lenders not to split the loan amount dated August 31 so that it would not present itself as non-performing assets, until the order was processed.
With this order it is now clear to the lenders on the issue of division of property as the high court ruled that the suspension should continue.
Despite the division of assets, banks have indicated that loans would be reduced by inefficiency if not by the September September order. Such slippage, known as proforma slippage, was identified after a bank regulator casually asked banks to do the job, bankers said.
According to the ICRA rate, basically, the GNPA of banks stands at Rs. 8.7 trillion or 8.3% development as compared to the reported GNPA of Rs. 7.4 trillion (7.1%) as of December 31, 2020.
The Net NPA rate for banks, basically, stood at Rs. 2.7 trillion or 2.7% development as compared to the reported NNPA of all Rs banks. 1.7 trillion (1.7%) as of December 31, 2020.
ICRA said that without the position of the Hon’ble High Court, Gross NPAs banks would have been as high as Rs 1.3 lakh crore (1.2%) and Net NPAs would have increased by Rs 1.0 trillion (1.0%).
The total SPA for SPA was 4.77% as in December 2020 it would have been 5.44% in the absence of segregation of assets.
“The decision of the Supreme Court is welcome. The court has reduced their level of legal review and does not favor the implementation of the policy, ”said Mahesh Misra, chief executive officer of India Mortgage Guarantee Corporation.
“Any other result could be morally dangerous and punishable by honest lenders. This also sets a good example, ”said Misra.