Strategy to Combat the Unintended Non-Performing Loans During COVID-19: An Impact Analysis

COVID-19 - the sorrow of the world, the melancholy of 2020-2021, has not left any sector untouched. It has impacted the world economically and financially. In this paper, we have analysed the economic impact of COVID-19 with a specific attention on Non-performing Loans (NPLs). There has been a caten...

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Bibliographic Details
Published in:Journal of Economic Policy and Research 2022-04, Vol.17 (2), p.61-78
Main Authors: Thakkar, Hiteshkumar, Makkar, Sarthak, Goyat, Prominder
Format: Article
Language:English
Subjects:
Bankruptcy
COVID-19
Debt
Economic policy
Errors
Financial systems
Insolvency
Loans
Moratoriums
Pandemics
Policy making
Risk
Supply chains
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Summary:COVID-19 - the sorrow of the world, the melancholy of 2020-2021, has not left any sector untouched. It has impacted the world economically and financially. In this paper, we have analysed the economic impact of COVID-19 with a specific attention on Non-performing Loans (NPLs). There has been a catena of policies of Govt, of India to mitigate the impact of the pandemic on Creditors. The reasonable prudent policy would protect a genuine borrower who is not capable pay its due to the adverse effects of pandemic but default can sometimes be intended and deliberate. In this paper we have analysed the probable impact of intended NPL and unintended NPL on the financial system.The objective of the policy makers should be to restrict economy to the efficient NPLs or low risk NPLs. But there can be some evaluating errors and other cross dynamic events which might lead to systemic unintended NPL or moderate risk NPL stage. In such cases, the policy makers should do advanced preparatory planning in order to restrict NPL to moderate risk and not allow the system to reach high risk NPL stage. In this paper we discuss a model which provides framework of intended NPL stage and unintended NPL and the respective consequences of both. Finally, the paper provides policy implication with regards to restraint NPL in the low risk NPL category.
ISSN:0975-8577