Awkward Regulatory Tango Over COVID-19 Relief

The COVID-19 pandemic and its dampening effects on economies has compelled governments and regulators to introduce innovative measures, in particular to restore stakeholder confidence in financial markets. Among Indian regulators, the Reserve Bank of India (RBI) responded to the pandemic with remarkable alacrity when it issued directions on 27 March. These put in place a framework that enabled banks and financial institutions regulated by it to offer some respite to borrowers in the form of a moratorium on their loans. On 17 April, the RBI issued further directions which provided much needed clarity on provisioning by enabling banks and financial institutions to maintain pre-pandemic asset classifications.