For someone who had never defaulted on any loans before March this year, Monica Keerthi Karri gets quite harried at the mention of loan recovery agents. The 32-year-old teacher from Visakhapatnam lost her job and income when covid-19 struck and has been warding off recovery agents ever since.
“It was only after March that I could not pay my equated monthly instalments (EMIs) and was repeatedly harassed. So much so that some agents reached my parent’s house to recover missed payments, traumatizing them," said Karri.
She is among the millions of Indians who have started defaulting on loans from banks, non-banking financial companies (NBFCs) and app-based lenders. While the last round of bad loans was all about large corporate defaulters who were given unhindered access to bank funds, the current crisis, which is just about starting to unfold after a nervous pause due to a few months of the moratorium, has hit retail borrowers the hardest.
Though the Reserve Bank of India (RBI) had allowed a six-month moratorium between March and August, borrowers believe it was insufficient, considering the extent of the damage to their cash flows caused by the pandemic. Initial data released by the central bank shows that more than half of all retail borrowers who had availed a loan had opted for a moratorium by the end of April. Not surprisingly, corporates were more resilient amid the crisis, with only 31% under moratorium in the same period.
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