Better alternatives to loan moratorium SECTIONS Last Updated: Jun 10, 2021, 10:59 PM IST Share Synopsis The concern is real, and it is imperative to address the distress in India’s small business universe that prompts such calls. But moratorium is not the solution; it can actually make matters worse. Clamour for a fresh moratorium on bank loans is gaining strength. The concern is real, and it is imperative to address the distress in India’s small business universe that prompts such calls. But moratorium is not the solution; it can actually make matters worse. It would add to the stress in the banking system, without bringing relief to companies. Borrowers will face large, accumulated interest burdens when the moratorium ends. We need pragmatic alternatives. Converting a portion of the outstanding loan and interest into equity is one option. This would lower the debt servicing burden on the borrower. Additionally, troubled small companies could be given equity support, say, from the fund of funds the government had promised. When companies turn around, the companies can buy back the equity or the equity could be sold in the secondary market.