LOAN MORATORIUM 2020- ITS IMPACT ON INDIAN BANKS
Abstract
Moratoriums area period of temporary suspension of an activity or law till a decision to lift the suspension is made, as in the case of the issues that led to the moratorium are resolved. Moratoriums may be imposed by regulators, by a business, or by the government. A moratorium is often ordered in response to situations of crisis. Moratoriums are not new to the Indian banking sector and have been granted and imposed in multiple instances in the last 20 years. Since 1999 moratoriums have been imposed on 9 banks for various reasons. Recently, a six-month moratorium was offered by the Reserve Bank of India (RBI) between March 1, 2020, and August 31, 2020, on all loan equated monthly instalments, to help lessen the troubles faced by the borrowers due to the COVID-19 pandemic. This paper aims to study the recently granted moratorium by the RBI to assess and predict its impact on the banking sector. The study will also reflect on similar instances of moratoriums that have been granted in the United States, Greece, and Thailand in the last 20 years.
References
Arito, O. (2017). Forgiveness Versus Financing: The determinants and impact of SME debt
forbearance in Japan1. RIETI Discussion Paper Series 17-E-086. Retrieved October 10, 2020, from https://www.rieti.go.jp/jp/publications/dp/17e086.pdf
Artavanis, N., & Spyridopoulos, I. (2017). Foreclosure Moratorium and Strategic Default.
EFMA. Retrieved October 14, 2020, from https://www.frbatlanta.org/-/media/docum ents/news/conferences/2017/1201-real-estate-industry-forum/papers/Artavanis_Foreclosure_Moratorium _and_Stategic_Default.pdf
Arslanalp, S., & Henry, P. (2005). Is Debt Relief Efficient?. The Journal of Finance, 60(2),
-1051.
Bhargava, K. (2020, April 21). Loan moratorium may haunt banks even after getting lifted;
Moody’s explains post moratorium credit landscape. Financial Express. Retrieved October 22, 2020, fromhttps://www.financialexpress.com/industry/banking-finance/l oan-moratorium-may-haunt-banks-even-after-getting-lifted-moodys-explains-post-mo ratorium-credit-landscape/1935473/
BFSI Research CARE Ratings. (2020, October 13). Analysis of NPA movement [Circular].
Retrieved October 15, 2020, from https://www.careratings.com/upload/NewsFiles/SplAnalysis/Analysis%20of%20NPA%20Movement.pdf
Collins, J.M., & Urban, C. (2017). The Effects of a Foreclosure Moratorium on Loan
Repayment Behaviors. Regional Science and Urban Economics, 68(1), 73-83. https://doi.org/10.1016/j.regsciurbeco.2017.10.010
Dhanorkar, S. (2020). How taking loan moratorium will impact your future EMIs. The Economic Times. Retrieved October 7, 2020, from https://economictimes.indiatim es.com/wealth/borrow/how-taking-loan-moratorium-will-impact-your-future-emis
Imai, M. (2016). Japan’s Regulatory Response to Banking Problems. Research Gate. Retrieved
October 12, 2020, from https://www.researchgate.net/publication/322893135
Mukherjee, S., Subramanian, K., & Tantri, P. (2014). Costs and Benefits of Debt Moratoria:
Evidence from a Natural Experiment in India. Indian School of Business Working Paper. Retrieved October 10, 2020, from https://cdn.auckland.ac.nz/assets/facultycon ferences/faculty-of-law/Ownership%20and%20Control%20Conference/Costs%20and %20Benefits%20of%20Debt%20Moratoria%20Evidence%20from%20a%20Natural%20experiment%20in%20India,%20Subramanian.pdf
Nuansoi, W. (2013). The Study on Farmers’ Debt, Loan Repayment, and Guideline for Debt
Settlement in the South of Thailand. International Journal of Agriculture and Food Science Technology, 4(8), 835-840.
Reserve Bank of India. (2020, March 27). COVID-19 – Regulatory Package [Circular].
Retrieved October 7, 2020, from https://www.rbi.org.in/Scripts/NotificationUser.a spx?Id=11835&Mode=0
Reserve Bank of India. (2020, August 6). Resolution framework for COVID-19-related stress
[Circular].Retrieved October 19, 2020, fromhttps://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11941&Mode=0#:~:text=4.,laid%20out%20in%20this%20Annex
Reserve Bank of India. (2020, July 24). Chapter II: Financial institutions: Soundness and
resilience [Circular].Retrieved October 15, 2020, from https://m.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=1148
Sikdar, A. (2020, September 5). Loan moratorium impact on Indian banks. The Times of
India. Retrieved October 7, 2020, from https://timesofindia.indiatimes.com/readersblog/anichh-economics/loan-moratorium-impact-on-indian-banks-25556/
Somasundaram, M. (2020). Merits And Demerits Of Moratorium Offered By Banks And Non-
banking Financial Companies In India. Asia Pacific Journal of Research, 1(1), 2347-4793.
Sood, J. (2020, March 6). Before Yes Bank, moratorium was imposed on these 8 banks
since 1999. Outlook India. Retrieved October 15, 2020, fromhttps://www.outlookindia.com/website/story/business-news-before-yes-bank-moratorium-was-imposed-on-these-8-banks-since-1999/34 8350
Sinha, S. (2019). As moratorium ends, NPAs may rise in January. The Economic Times.
Retrieved October 15, 2020, fromhttps://economictimes.indiatimes.com/industry/ban king/finance/banking/as-moratorium-ends-npas-may-rise-in-january/articleshow/730 39048.cms?
Unnikrishnan, D. (2020, August 26). RBI's annual report: Moratorium, loan restructuring
may impact banks’ health. Money Control. Retrieved October 20, 2020, fromhttps://www.moneycontrol.com/news/business/economy/rbis-annual-report-moratori um-loan-restructuring-may-impact-banks-health-5752121.html
Copyright (c) 2020 Meera Mehta, Rishab Kaul
This work is licensed under a Creative Commons Attribution 4.0 International License.
CRIBFB is licensed under a 