I had written on 27.03.20 that the loan moratorium announcement was done in haste in March 2020. The consequences of a hurriedly announced unplanned move was never really comprehended or possibly ignored in the interest of political expediency. The impact on banks and NBFCs , possibly the entire financial system in India has been debilitating . This was not a targeted moratorium to the needy but a blanket moratorium for all and sundry . That it would be credit culture negative was a foregone conclusion. Both, Demonetization and GST implementation suffered from similar malaise of a broad macro level action without attention to details and planning to manage the risk. If the government is to waive the interest for loans upto 2 crores the cost of delinquency is significantly lowered if not negated . This is contrary to universally accepted norms of using high cost of delinquency as a deterrent . Borrowers who have not availed of any moratorium would turn out to be big losers with the message driven home that if are able to pay it it is foolish to pay up when there is an opportunity to not pay without any cost or consequence . This is going to be an unmitigated disaster for the credit and financial system . The government should not have submitted to court that it will consider waiving compounding of interest for loans upto 2 crores whatever be the political compulsion.This is a compounded blunder.

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