thought that forbearance extended through India’s first debt relief package, which is the setting of our study, had benefited households that were in actual financial distress and needed support. Consistent with interpreting the pandemic as an aggregate shock, respondents believe that this is the case: 51.8 percent of respondents think that most beneficiaries needed and deserved relief, and only 1.71 percent<sup>11</sup> Second, we asked borrowers how they thought a repayment moratorium would affect beliefs about the lender —the primary channel through which one would expect debt forbearance to generate moral hazard. We first asked respondents whether they agreed with the statement _“if a private lender gives more debt relief than others, their borrowers might take them less seriously and de-prioritize making payments to that lender”_ , which captures the idea that forbearance granted by private lenders reduces loan repayment because it damages the lender’s reputation and creates expectations of lenient credit enforcement. We find that 65 percent of respondents agree with this statement. We then asked respondents whether they agreed with the statement _“widespread debt relief can discourage borrowers who are able to pay their debts from paying them in the future”_ to capture beliefs about the effect of forbearance on overall credit discipline. A similarly high share (66 percent) of respondents agreed with this statement.

We additionally asked borrowers about their expectations of future debt relief, which is another channel through which debt forbearance could weaken credit discipline and generate moral hazard. Specifically, respondents were asked whether they expected that there would be another debt moratorium in the event that India would experience future waves of the pandemic similar to the events that triggered the first round of debt forbearance in India. The overwhelming majority of respondents in our representative sample of the population (72.93 percent) believe this to be “likely" or “very likely”. We then ask whether borrowers expect future forbearance to be offered by private banks or the government, and find that 63 percent of respondents believe that banks are likely or very likely to offer forbearance in the future while an overwhelming majority of 84 percent of respondents believe that future forbearance will be granted as the result of a government or regulator initiative.

Finally, we also compare prior beliefs in the population to beliefs among experts, elicited through the Social Science Prediction Platform (DellaVigna et al., 2019). The results, reported in the Supplementary Appendix, show that expert predictions differ from those in the population of borrowers. Experts are more optimistic about the effect of forbearance on debt repayment and on average predict positive treatment effects of debt forbearance offers on loan repayment. To match the design of our experiment, we asked experts to predict the effect of forbearance offered by the regulator and forbearance offered by one’s lender. Interestingly, we find that the median expert _overestimates_ the effect of forbearance offered by the regulator, and _underestimates_ the effect of forbearance offered by a private lender on both repayment rates and on the demand for doing business with the lender in the future.

In sum, the results of a survey representative of the borrower population illustrate that respondents overwhelmingly expect repayment deferrals to have negative implications for credit discipline. Moreover, respondents believe that loan repayment could be impacted negatively through two alternative channels: the anticipation of future relief and expectations of more lenient credit enforcement by

> 11 In total, 39.9 percent of respondents think that some beneficiaries needed and deserved relief, and 6.6 percent of respondents think some beneficiaries did not need or deserve debt forbearance.

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