Friday, June 14, 2024

Dvara Analysis Weblog | Does moratorium have an effect on mortgage reimbursement behaviour?


Rakshith S. Ponnathpur & Nitin Vishen


Governments and lenders present mortgage moratoria to assist struggling debtors, significantly throughout an financial disaster. Whereas it might present reduction to debtors, such a coverage additionally has a risk of inducing ethical hazard among the many beneficiaries. However it’s troublesome to segregate the consequences of the disaster itself from that of moratorium as a reduction measure, on mortgage reimbursement habits. On this paper, we use an unanticipated announcement of lockdown to curb the unfold of Covid-19 in India on March twenty fifth 2020 to estimate the affect of moratorium on mortgage reimbursement behaviour. The Reserve Financial institution of India introduced a moratorium on March twenty seventh 2020, on fee of all mortgage instalments falling due between March 1, 2020, and Might 31, 2020. Debtors whose loans had been due within the final week of March 2020, i.e., between March twenty fifth to thirty first, 2020, however weren’t capable of repay attributable to lockdown restrictions, thereby availed the moratorium throughout March 2020. Whereas debtors whose installment due dates had been between March 1st-Twenty fourth, 2020, and had already repaid their installments earlier than the lockdown, may solely avail the moratorium from April 2020 onwards. We use this arbitrary date cut-off imposed by the announcement of lockdown for the identification of causal affect of 1 further month of moratorium on debtors’ mortgage reimbursement habits submit the moratorium. We discover that an additional month of moratorium led to a 6.4 share level larger month-to-month default price and a 2.5 share level larger Non-Performing Belongings (NPA) classification price amongst debtors after the moratorium. We additionally discover a further month of moratorium led to a better NPA classification price amongst particular person mortgage debtors (5.6%) in comparison with joint-liability group mortgage debtors (2.4%) who’re peer-monitored, suggesting ethical hazard may clarify the noticed borrower behaviour submit the moratorium.

The total paper is offered right here.

Cite this paper:


Ponnathpur, R. S., & Vishen, N. (2023). Does moratorium have an effect on mortgage reimbursement behaviour? Retrieved from Dvara Analysis.


Ponnathpur, Rakshith S. and Nitin Vishen. “Does moratorium have an effect on mortgage reimbursement behaviour?” 2023. Dvara Analysis.


Ponnathpur, Rakshith S., and Nitin Vishen. 2023. “Does moratorium have an effect on mortgage reimbursement behaviour?” Dvara Analysis.

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