Banking stocks gained on Tuesday soon after the Supreme Court pronounced its verdict on loan moratorium. Bank Nifty was up 1.73 per cent. Indusind Bank, Axis Bank, SBI, and HDFC Bank were among the gainers on the Sensex.

Rating agency Crisil said the verdict clears the way for lenders to recognise non-performing assets as per the delinquency record of borrowers, which they have not been able to since the end of the moratorium in August 2020.

Most lenders have, however, disclosed proforma NPAs and also made provisions against them, which may limit the immediate impact on profitability, it further said.

“Reported Gross NPAs of the banking system is estimated to be about seven per cent as of December 31, 2020. These would have clocked about 100 basis points higher at about eight per cent if the NPA standstill had not been announced by the Supreme Court earlier,” it said.

Standstill on recognition of NPAs had tied the hand of lenders and impacted the credit discipline of borrowers. Lenders will now be able to enforce legal measures and support their recovery efforts, said Crisil.

The Centre may have to allocate an additional ₹7,000 crore as relief to borrowers following the Supreme Court verdict on loan moratorium on Tuesday, according to ICRA.

“As per our estimates, the compounded interest for six months of moratorium across all lenders is estimated at ₹13,500 crore to ₹14,000 crore,” said Anil Gupta, Vice President, Financial Sector Ratings, ICRA.

Pointing out that the Centre has already announced relief for borrowers having borrowings up to ₹2 crore, which was estimated to cost about ₹6,500 crore to the Exchequer, Gupta said: “With the announcement of waiver for all borrowers, the additional relief of about ₹7,000 crore to ₹7,500 will need to be provided to borrowers.”

Satyam Kumar, CEO, and Co-founder, Loantap, also said the verdict will allow regular functioning of the banking system and ensure the economy continues its course to normalcy.

According to Samantak Das, Chief Economist and Head of Research and REIS, India, JLL, the refusal to not extend the moratorium period is unlikely to considerably impact the developers since not many of them opted for the moratorium in the first place.

“As far as home buyers are concerned, significantly low-interest rates offered by various banks have already pushed up affordability,” he said.