“Cautious” Indian borrowers opted for halting loan repayments despite no impact on income

Queuing up to pay back.
Queuing up to pay back.
Image: REUTERS/Rupak De Chowdhuri
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In March, when the Covid-19 pandemic first picked pace in India, many Indians lept for a relief measure in anticipation of the worse.

Around 23% of Indians who opted for stopping their loan repayment when the central bank launched a moratorium scheme in March had not witnessed any pay cuts, according to a survey (pdf) conducted by digital lending marketplace This may have been “a cautious approach…to preserve funds for an uncertain future or plain lack of awareness about the accrual of interest cost on availing loan moratorium facility,” the survey observed.

The moratorium option was part of a Covid-19 relief package aimed at reducing the financial burden on Indian households in tough economic times.

The survey included responses from 8,600 borrowers aged between 24 and 57 years, across 37 Indian cities. Of these respondents, around 56% said that they had availed moratorium.

What data says

The findings of the survey corroborate with the data revealed by banks.

After an initial uptick, the number of loans under moratorium has dropped sharply in the past three months for some of the banks. The latest set of data shows that more borrowers have resumed payment of their loan instalments.

Analysts at Morgan Stanley (Research) are bullish especially about large private banks, stating that a large part of borrowers opted for the moratorium in a bid to merely preserve liquidity. “We are less worried. On books under the moratorium, we note that a large part of the moratorium at large private banks is driven by liquidity preservation. Indeed, a lot of customers are receiving salary credits.” the analysts noted in the report dated Sept. 10.