Theme: Debt Distress

An action project to help financial service providers detect debt distress among their borrowers and administer interventions to alleviate distress. To read full report, Click here.

The microfinance industry has witnessed moves by the Reserve Bank of India (RBI) to revise the regulatory framework (March 2022) for it and also caution it against an exclusive focus on business growth (November 2022).

Governments and lenders provide loan moratoria to help struggling borrowers, particularly during an economic crisis. While it can provide relief to borrowers, such a policy also has a possibility of inducing moral hazard among the beneficiaries.

An action project to help financial service providers detect debt
distress among their borrowers and administer interventions to
alleviate distress.

T he Insolvency and Bankruptcy Code, 2016 (Code) is the umbrella legislation for
insolvency resolution of corporate persons, partnership firms and individuals

In this post, we find that the distribution of net worth is skewed as there is a higher concentration of households with lower levels of net worth. It is also seen that households better integrated in the formal financial system enjoy a higher net worth compared to households that are not.

The pandemic-led economic crisis has exacerbated the rising indebtedness among India’s poor households, and could push more families into a debt trap

In this post, to help enhance the efficacy of relevant frameworks, we lay out the key principles that the two primary actors, the banking sector regulator and the regulated lenders, must be guided by while designing policies to tackle debt distress caused by severe economic shocks.