Independent Research and Policy Advocacy

COVID-19 and Debt Moratorium – The Case of Microcredit

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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.

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