The maths of moratorium

At a cost of 0.1-0.15% of GDP, the government can give confidence to both banks and MSMEs

Moratorium has been a keyword in the government’s ann-ouncements after the Covid-19 crisis broke out. Retail and corporate borrowers can avail of it for six months, and more importantly, micro, small and medium enterprises (MSMEs) will get it for one year. The latter, in fact, was an important element during Finance Minister Nirmala Sitharaman’s “five-day-long Rs 21-trillion (10 per cent of GDP)” stimulus package announcement. The package included Rs 3-trillion government-guaranteed loans to MSMEs.

Banks, on their part, have sent mandatory mails to all customers asking them to use the moratorium facility. At the same time, they have also maintained “social