As per the latest Supreme Court orders, banks cannot declare any loan an NPA till further notice. 

This is in response to several petitions challenging the imposition of interest on loans after the six-month repayment moratorium that ended on August 31, 2020. This order applies only to loans that chose the EMI deferment of 6 months that ended on August 31, 2020. 

The Reserve Bank of India had granted a six-month moratorium, which ended on August 31st 2020. This indicates that borrowers with a home loan, auto loan or other retail loans were given the option of deferring six EMIs. 

Banks, on the other hand, said that borrowers who want to defer their payments will have to pay more. SBI stated on its website that the incremental interest payable on a home loan of Rs.30 lakhs with a remaining maturity of 15 years will be Rs.4.544 lakh, almost equal to an additional 16 EMIs. This is due to the compounding of interest. 

The bench clarified that the issue is about interest compounding regulations. It was indicated that a moratorium and penal interest could not be coupled. 

While this is going on one side, as per the latest reports, the Centre is in talks with the Reserve Bank of India (RBI) and other parties to see if the rules for non-performing assets (NPAs), or bad loans, can be relaxed by expanding the classification period to at least 120 days.

When a loan account is not paid for 90 days, it becomes a non-performing asset (NPA). The proposal comes in the midst of rising bad loans, especially among state-owned lenders, as a result of the Covid-19 pandemic's setbacks.


Covid-19 pandemic has caused a severe setback in loan recovery for both state-owned and private sector lenders likewise. Immediate economic reforms are the need of the hour to ensure that the lenders are not affected by increasing NPAs in the current economic scenario.