Financials services under pressure ahead of SC verdict on interest waiver case
Published On: Friday, June 12, 2020 | By: Team KnowMyStock
Shares of financial services companies were under pressure today (12th June 2020) with most of the related indices slipping over 3 percent on NSE ahead of the Supreme Court hearing on interest waiver case. Today's scheduled Supreme Court hearing on interest loan waiver case, sought by homebuyers, on the loans under moratorium is more crucial for non-banking financial companies (NBFCs), who also have granted moratoriums to their borrowers until August. Moreover, a paper released by the Reserve Bank of India (RBI) has warned that despite interventions by the central bank and the government, the NBFC system may see deterioration in credit quality on account of Covid-19 related disruptions.
"The RBI has argued the interest waiver for six months on moratorium loans would be significant at around Rs 2 trillion (15 per cent of the banks’ FY19 networth). While we believe the probability of an adverse ruling is minuscule, the judgment against banks could affect financial stability and trigger capital calls across banks,” experts say.
Any judgment on interest waiver also needs to consider whether the waiver should be made available only to customers who sought moratorium or even others who, despite facing hardships/lockdown, continued paying their monthly dues. Also, as a fair proportion of lending happens outside banks, from NBFCs and other lenders, the judgment would have implications for these entities as well. Loan waivers in the past have impacted credit behavior, and thus this event becomes even more important from a credit behavior perspective within both moratorium and regular-paying loans, experts opnied.
We are on Telegram!
JOIN our telegram channel to receive updates on Financial News and Stock and FNO Tips.
Click Here!
Follow Us On:
