The Supreme Court (SC) on Thursday said that banks should not declare loan accounts as non-performing assets for two months. Further the apex court added that lenders should not take action against borrowers who are coercive to make payment as we should protect them from double whammy of COVID19 and financial disruptions.
Hearing a host of petitions for interest waiver on loan moratorium the apex court on September 3 said that Accounts that were not NPAs on September 1 (as Moratorium ended) should not become NPA for next two months.
The RBI appointed expert committee is yet to share sector specific guidelines on September 6.Also, banks have a window of three months to implement loan restructuring guidelines. Thus, customers should not be flagged as default accounts in face of COVID induced financial hardships.
The bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah heard the petitions. The next hearing will continue on September 10, 2020.
Previously hearing petitions seeking relief for interest on interest under Moratorium the Supreme Court has said: there is no merit in charging interest on interest.
“Question is about the demands of compound interest in the meantime. Moratorium and penal interest cannot go together. RBI will have to clarify.” (Justice Reddy.)
Solicitor General Tushar Mehta (representing GoI) said:
COVID impacted each sector differently. Some sectors like Pharma, IT have seen good impact.
The idea of the moratorium was to ease repayment burden amid COVID19 and lockdown. It was meant to help businesses manage working capital issues. Waiving off interest was not the agenda. The effort is only those impacted by COVID & are facing financial issues get the relief and not defaulters.
Loan accounts will not become NPAs on September 1 after the moratorium ends.
(As per RBI’s guidelines non payment for three months, makes the account an NPA.)
The expert committee will share sector wise loan restructuring guidelines on September 6.
Updated On Jul 8, 2026
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Written By Reshma RawatAssistant Content ManagerCredit Cards, Credit Score, Personal Loan, Home Loan, etc.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
