A Study on Effectiveness of Loan Restructuring Mechanisms in Mitigating Default Risk: Evidence from Bajaj Finance Customers
Mrs. Shravan Sarojmal Pande
Student, Depratmemt Of Business Administration, Sipna College Of Engineering And Technology, Amravati
Abstract
Loan Defaults Pose A Significant Challenge To Financial Institutions, Particularly Non-Banking Financial Companies (Nbfcs) That Cater To A Diverse And Risk-Sensitive Customer Base. Loan Restructuring Has Emerged As An Important Credit Risk Management Mechanism To Support Borrowers Facing Temporary Financial Distress And To Prevent Accounts From Turning Into Non-Performing Assets. This Study Examines The Effectiveness Of Loan Restructuring Mechanisms In Mitigating Default Risk, With Specific Reference To Bajaj Finance Customers.
The Study Adopts A Descriptive And Empirical Research Design Based On Both Primary And Secondary Data. Primary Data Were Collected Through A Structured Questionnaire Administered To Customers Who Have Availed Loan Restructuring Facilities From Bajaj Finance. Secondary Data Were Sourced From Rbi Guidelines, Annual Reports, Journals, And Published Research Studies. The Study Analyzes Various Restructuring Mechanisms Such As Extension Of Loan Tenure, Reduction In Equated Monthly Installments (Emis), And Moratorium Facilities, And Evaluates Their Impact On Borrowers’ Repayment Behavior And Default Risk.
The Findings Of The Study Indicate That Loan Restructuring Significantly Improves Repayment Capacity And Reduces The Likelihood Of Default Among Borrowers. A Majority Of Respondents Reported Improved Cash Flow Management And Timely Repayment Of Emis After Restructuring. Customer Satisfaction And Positive Perception Of The Restructuring SSDiscipline. However, The Study Also Highlights Concerns Regarding Increased Overall Interest Burden Due To Extended Repayment Periods.
The Study Concludes That Loan Restructuring Mechanisms, When Implemented Prudently And In Line With Borrower Repayment Capacity, Are Effective Tools For Mitigating Default Risk And Maintaining Asset Quality. The Findings Provide Useful Insights For Nbfcs And Policymakers In Strengthening Credit Risk Management Strategies.
Keywords
Loan Restructuring, Default Risk Mitigation, Credit Risk Management, Non-Performing Assets (Npas), Nbfcs, Bajaj Finance, Repayment Behavior, Emi Restructuring, Customer Satisfaction, Financial Distress.
