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Regulatory Forbearance: An Emergency Medicine, Not Staple Diet! 223
Figure 20: Accelerated Firm Defaults due to Forbearance
Source: MCA (for restructured loans), CMIE Prowess for credit ratings, and CIBIL’s website for suit-filed database
of defaulters
Pre: Average percentage change two years after and before for firms restructured during 2002-2006
Post: Average percentage change two years after and before for firms restructured during 2009-2015
Figure 21: Macroeconomic Impact - Decline in Industry Competition due to Forbearance
Source: MCA (for restructured loans), CMIE Prowess for firm incorporations
High (Low) Restructuring: Industries that had above (below) median share of restructured firms
BANK CLEAN-UP WITHOUT ADEQUATE CAPITALIZATION
7.29 Finally, after continuing forbearance for seven years, the RBI decided to bite the bullet and
withdrew regulatory forbearance starting from April 2015. The RBI also decided to conduct a
