Dvara Research BlogDvara Research Blog
Dvara Research Blog
Doorway to Financial Access
  • Home
  • Our Work
  • Themes
  • Subscribe
    • Email Subscription
    • Feed
  • Contact Us
Menu back  

COVID-19 and Debt Moratorium – The Case of Microcredit

September 28, 2020Featured, Research Viewed : 769

By Dwijaraj Bhattacharya, Monami Dasgupta, Misha Sharma, Dvara Research

In the wake of COVID-19 related lockdown and the resultant impact on the financial lives of millions of households, the Reserve Bank of India (RBI) approved a series of regulatory measures, which among others, enabled lending institutions to provide their borrowers with a 6 month-repayment moratorium on term loans. A debt moratorium at this scale has had unique implications for lenders, borrowers and regulators that need careful consideration. Lenders care most about the impact of debt moratorium on credit risk, liquidity and cost of raising fresh capital, while borrowers care most about the cost of debt moratorium and their ability to repay once moratorium is lifted. Regulators on the other hand have had to walk a fine line between protecting consumer rights and ensuring financial stability of the system, in the backdrop of ethical questions being raised about the cost of moratorium. It is these potential implications that motivate us to examine the topic of debt moratorium as a policy measure and its effectiveness in providing relief to the end customer without impacting the financial stability of financial institutions and the system at large. While the actual impact of debt moratorium on both lenders and borrowers will play out in the coming month, this policy brief note provides early insights on the effectiveness of debt moratorium as a policy measure.

This policy brief examines the implications of debt moratorium in the context of microcredit or Joint Liability Group (JLG) loans offered by NBFC-Microfinance Institutions (MFIs), non-MFI NBFCs, Small Finance Banks (SFBs) and Commercial Banks, henceforth referred to as ‘microfinance providers’. Through this research, we attempt to understand how microfinance providers deployed and operationalised moratorium for its customers, its potential repercussions on customer’s repayment discipline and behaviour, the effectiveness of moratorium as a policy tool measure and early lessons learnt. We draw on our conversations with practitioners from different types of microfinance providers to document key takeaways on effectiveness of debt moratorium and perspectives on future course of action that policymakers could take to ease the financial burden on both customers and lenders.

The full policy brief is available here.

Share Via :Tweet about this on Twitter
Twitter
Share on Facebook
Facebook
Share on LinkedIn
Linkedin
Email this to someone
email
COVID-19Debt MoratoriumFinancial Systems DesignHousehold FinancemicrocreditmicrofinanceMoratoriumNBFCNBFC-MFIRBISFB
Search
Recent Comments
  • Harshit Rathi on Artificial Intelligence in Digital Credit in India: “Hi, Wonderful article on the use of AI/ML for digital credit in India. As rightly mentioned in the article, many…”
  • Srikara Prasad on Artificial Intelligence in Digital Credit in India: “Thank you, Bindu. Our upcoming posts on regulation of AI in finance will benefit from these pointers. It will be…”
  • Bindu on Artificial Intelligence in Digital Credit in India: “Thank you for this nice overview. I would love to see a deeper exploration of these use cases beyond claims…”
Subscribe and Follow Us

Popular Post

Popular Post
  • Analysing Trends in Indian Households’ Potential to Save
    January 23, 2021
  • Our Response to the Working Document on Enforcement Mechanisms for Responsible #AIforAll
    January 18, 2021
  • Access, Redressal & Finance in Uttar Pradesh: The Transgender Community in Uttar Pradesh
    January 5, 2021

Categories

Categories
  • Channels(88)
  • Consumer Protection(33)
  • Events(30)
  • Featured(28)
  • Field Reports(6)
  • From the field(9)
  • General(22)
  • Guest(29)
  • Household Research(75)
  • Long Term Debt Markets(9)
  • News(45)
  • Origination(30)
  • Products(42)
  • Regulation(112)
  • Research(166)
  • Risk Aggregation(26)
  • Risk transmission(63)
  • Small Cities(21)
  • Technology(25)
  • Uncategorized(105)
  • Unemployment Support(5)

Archives

Archives
  • January 2021 (3)
  • December 2020 (7)
  • November 2020 (7)
  • October 2020 (11)
  • September 2020 (10)
  • August 2020 (12)
  • July 2020 (3)
  • June 2020 (5)
  • May 2020 (8)
  • April 2020 (4)
  • March 2020 (8)
  • February 2020 (3)
  • January 2020 (9)
  • December 2019 (4)
  • November 2019 (3)
  • October 2019 (7)
  • September 2019 (3)
  • August 2019 (2)
  • July 2019 (4)
  • June 2019 (4)
  • May 2019 (4)
  • April 2019 (7)
  • March 2019 (2)
  • February 2019 (3)
  • January 2019 (3)
  • December 2018 (5)
  • November 2018 (2)
  • October 2018 (5)
  • September 2018 (2)
  • August 2018 (2)
  • July 2018 (2)
  • June 2018 (2)
  • May 2018 (1)
  • April 2018 (1)
  • March 2018 (5)
  • February 2018 (2)
  • January 2018 (2)
  • December 2017 (5)
  • November 2017 (4)
  • October 2017 (3)
  • September 2017 (1)
  • August 2017 (3)
  • July 2017 (1)
  • June 2017 (3)
  • May 2017 (4)
  • April 2017 (3)
  • March 2017 (4)
  • February 2017 (3)
  • January 2017 (6)
  • December 2016 (5)
  • November 2016 (2)
  • October 2016 (3)
  • September 2016 (5)
  • August 2016 (4)
  • July 2016 (4)
  • June 2016 (8)
  • May 2016 (4)
  • April 2016 (5)
  • March 2016 (4)
  • February 2016 (3)
  • January 2016 (3)
  • December 2015 (3)
  • November 2015 (1)
  • October 2015 (2)
  • September 2015 (3)
  • August 2015 (5)
  • July 2015 (3)
  • June 2015 (3)
  • May 2015 (3)
  • April 2015 (2)
  • March 2015 (3)
  • February 2015 (1)
  • January 2015 (1)
  • December 2014 (5)
  • November 2014 (4)
  • October 2014 (3)
  • September 2014 (4)
  • August 2014 (4)
  • July 2014 (4)
  • June 2014 (8)
  • May 2014 (1)
  • April 2014 (4)
  • March 2014 (5)
  • February 2014 (6)
  • January 2014 (8)
  • December 2013 (7)
  • November 2013 (8)
  • October 2013 (7)
  • September 2013 (7)
  • August 2013 (5)
  • July 2013 (6)
  • June 2013 (7)
  • May 2013 (6)
  • April 2013 (8)
  • March 2013 (9)
  • February 2013 (6)
  • January 2013 (9)
  • December 2012 (8)
  • November 2012 (7)
  • October 2012 (5)
  • September 2012 (5)
  • August 2012 (5)
  • July 2012 (7)
  • June 2012 (4)
  • May 2012 (6)
  • April 2012 (4)
  • March 2012 (7)
  • February 2012 (6)
  • January 2012 (8)
  • December 2011 (8)
  • November 2011 (7)
  • October 2011 (8)
  • September 2011 (7)
  • August 2011 (3)
  • July 2011 (6)
  • June 2011 (11)
  • May 2011 (8)
  • April 2011 (9)
  • March 2011 (13)
  • February 2011 (10)
  • January 2011 (8)
  • December 2010 (10)
  • November 2010 (10)
  • October 2010 (10)
  • September 2010 (7)
  • August 2010 (13)
  • July 2010 (10)
  • June 2010 (6)
  • May 2010 (13)
  • April 2010 (7)
  • March 2010 (10)
  • February 2010 (5)
  • January 2010 (4)
  • December 2009 (3)
  • November 2009 (1)
  • October 2009 (6)
  • August 2009 (1)
  • July 2009 (2)
  • June 2009 (1)
  • May 2009 (1)
  • April 2009 (1)
  • March 2009 (1)

Share Via :Tweet about this on Twitter

Twitter

Share on Facebook

Facebook

Share on LinkedIn

Linkedin

Email this to someone

email

Site Map

www.dvara.com