Bankers hail SC verdict on loan moratorium

Mumbai: The bankers and other stakeholders have welcomed the Supreme Court's order on loan moratorium and said that it will have long-term impact on the banks' independence an taking decisions for loans. Moreover, experts opine that the SC verdict will throw up a lot of opportunities for special situation funds. Supreme Court bench comprising of three judges said providing complete interest waiver and extension of moratorium will have consequences for the economy. The Supreme Court has pronounced its judgment on a batch of pleas related to the six-month loan moratorium period, stating that it cannot allow waiver of complete interest and extension of the moratorium. ·

"The Supreme Court has recognized the supremacy of bank's role and has ensured the regulator's independence on the crucial matter which falls in line with global standards. If an account becomes NPA on completion of 90 days then it will be up to the banks concerned how to treat the loan account or if it should go for restructuring," M Narendra, former CMD of Indian Overseas Bank told Bizz Buzz. Experts are also of the view that moratorium, which was given for a limited period in a special situation, cannot be permanent fixtures in any case. "Government of India and the RBI through it various schemes and subsidies have been mindful of the anticipated liquidity challenges and related impact, which Covid-19 may have had on the ability of borrowers to continue operating in the ordinary course. Having said that temporary measures viz. the moratorium, introduced to tide over such exigencies like the pandemic, cannot be permanent measures or fixtures, and can only have a limited life- cycle for economic relief," said Uttara Kolhatkar, Partner, J Sagar Associates.

The judicial machinery cannot go beyond its brief. Courts cannot usurp the jurisdiction of decision makers in the garb of Judicial Review. Each wing of the State has the power to act in its own sphere of activity. Courts do not and cannot act as appellate authorities examining the correctness, suitability and appropriateness of a policy nor are courts advisors to the executive wing on matters of policy which the executive is entitled to formulate. Courts cannot usurp or abdicate, he added.

A section of people are of the view that the SC verdict will throw up a lot of opportunities for special situation funds. The reason being that a lot of leveraged companies who have an asset-liability mismatch will need to retenure their existing loans to match their cash flow. "The SC verdict will throw up a lot of opportunities for special situation funds. A lot of leveraged companies who have an asset-liability mismatch will need to retenure their existing loans to match their cash flows. Our USD one billion KSSF fund has the flexibility to give customised solutions for such situations," said Eshwar Karra, CEO-Kotak Special Situations Fund, Kotak Investment Advisors.