An Event Analysis of Loan Moratorium by RBI: Evidence from Indian Bank Index

Loan moratorium announcement by RBI and its impact on the banking stocks listed in the Bank nifty index has been explored in this study.The RBI announced a 3-month loan moratorium to ease the repayment of loans EMI's by the borrowers affected by the COVID-19 pandemic.This announcement is treated as the event for this study, based on the hypothesis that it may have influenced banking stock returns during such period.The study employs an event study methodology with a 41-day event window, encompassing 20 days before and 20 days after the announcement of the moratorium.This research is among the few studies that utilizes the event study methodology within the context of the Indian stock market to assess the impact of loan moratorium news on bank stock prices.The findings of the study indicate potential reaction on the stock returns after RBI's announcement on moratorium alongside 3-week lockdown announcement.The normal behaviour of the stock was observed to be disrupted by moratorium and lockdown.The findings of the study provide valuable insights into the market's response to significant economic policies and measures taken during crises.This study will enable policymakers in future decision-making and implementation and help investors in drawing strategy to trade during such events round the corner.