NBFCs have asked the RBI to allow them onetime reconstitution of all loans till March 2021. NBFCs said that their borrowers are facing funding related issues in between the pandemic of COVID-19 and the lockdown”.
NBFCs have also demanded extension of the RBI’s moratorium to them, relaxation on provisioning norms, and additional funding from Small industrial Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) through refinancing system.
According to the Finance Industry Development Council (FIDC), Industry players have suggested it to the RBI in a meeting on Monday.
The industry body said that “All their customers are facing disruptions in cash flow cycles, which is likely to be there for the major part of this fiscal. The most affected segments include transport operators, contractors, and MSMEs.”
FIDC said in a statement that “A one-time restructuring window should be allowed till March 2021 for amending the loan repayment schedules and/or extending loan tenures or restructuring the EMIs, without affecting the asset classification, in line with the revised expectation of cash flows of our customers”.
NBFCs want that the onetime restructuring should be allowed for all other borrowers as well.
FIDC said that “While the three-months moratorium has provided some relief to borrowers, they may not be in a position to commence loan servicing from the 4th month on account of the disruption”.
FIDC also said that “the experience of targeted long-term repo operations (TLTRO 2.0) indicates risk aversion on the part of banks. In the first auction of TLTRO 2.0, RBI had received ₹ 12,850 crore worth of bids, as against the notified amount of ₹ 25,000 crore”.
The sector has requested the RBI “RBI should consider providing funds to a refinance mechanism through SIDBI, NABARD, and their associate institutions which can provide long-term loans to NBFCs for their on-lending operations”.
Also, the central bank should consider allocating the unsubscribed part of TLTRO 2.0 to SIDBI and NABARD.
RBI announced on April 17 to provide special refinance facilities to NABARD, SIDBI and National Housing Bank (NHB) for a total amount of ₹ 50,000 crore to enable them to meet sectoral credit needs.
RBI had asked Last month to banks and NBFCs to maintain provisions of up to 10 % on all accounts that are at least 1 day past due and where a moratorium has been granted. The provision will be spread over two quarters – March 2020, and June 2020.
NBFCs said that “Given the nature of their borrowers and their businesses, it is routine for them to pay the EMIs a few days later”.
NBFCs also said that “This usually happens due to various local factors and is not to be seen as a sign of credit risk”.