Accounts not performing due to delay won't be labelled NPAs: Centre

Accounts not performing due to delay won't be labelled NPAs

The Centre has informed the Supreme Court that accounts becoming non-performing due to delay because of banks or any other reason need not suffer the label of non-performing assets (NPAs).
The Centre said concerns have also been expressed regarding possible downgradation of loan accounts from standard to NPAs and consequent impact on ratings.

The Centre submitted an affidavit saying, "The resolution framework announced by the RBI provides that loans accounts which slip into NPA between invocation and implementation may be upgraded as standard on the date of implementation itself. Invocation of restructuring is now done on, say, October 9 and completed by, say, November 9. Even if the account slips into NPA on October 10, it could be standard on November 9."

The affidavit said that nearly 50% of the borrowers have not availed of the moratorium and have deposited their installments.

The Centre informed the Supreme Court that more than 50% borrowers have not availed of the moratorium, and if waiving interest on all loans and advances is considered then it would have to forego in excess of Rs. 6 lakh crore.

The Centre emphasised that if banks were to bear the huge burden, then it would necessarily wipe out a substantial and a major part of their net worth, it would not be feasible for most of the banks and would render them unviable.

The Centre has considered the interest of people facing hardships amid the Covid-19 pandemic and said that it will go with the tradition of "hand-holding small borrowers", and has therefore decided to grant waiver of compounded interest for borrowers of loans of up to Rs. 2 crore.

The Supreme Court will hear the case today.