Detail-focused NBFCs seek refinancing window from FM

Mumbai: Cash-strapped non-bank providers operating in the retail area have approved the finance minister Nirmala Sitharaman is seeking a refinancing window that would reduce their dependence on banks and establishing a dedicated non-bank channel for long-term financing.

For banks have requested that this window be created through MUDRA, Small Industries Development Bank of India, National Bank for Agriculture and Rural Development and National Housing Bank. They also request a special purpose vehicle that would be able to utilize approx. 4 times to provide funding of Rs 50,000 crore for small and medium sized NBFCs.

Non-banks also want the sovereign to provide credit guarantees to the banks for their additional exposure to the NBFC, to lending to micro, small and medium-sized businesses, farmers and the affordable housing sector.

“Our customers are looking for more than three months of relief and lower EMIs, so a moratorium is not enough. We need a variety of tools available to streamline this crisis, ”said Raman Agarwal, co-chair of the Finance Industry Development Council, an industry body for financial non-banking companies. “Apart from a refinancing window and a credit guarantee scheme, we have also requested RBI governor to allow a one-time restructuring of all loans. ”

The four-page letter to Sitharaman has also stated that despite NBFC’s reliance on banks for funding, support has been rare and less frequent. “Banks have full risk aversion to small and medium-sized NBFCs that do not have AAA rating, despite various measures announced by the government and RBI, banks have not lent to them,” the letter states.

The banking system is currently flush with liquidity of over 7.5 lakh crore parked under Reserve Bank of IndiaThe reverse repo window. To ease the flow of credit to the NBFC sector, which was denied by most banks a three-month moratorium, the central bank had announced $ 50,000-crore of TLTRO 2.0 in tranches. But banks only offer 50% of the credit limit provided.

Even the development lending institution Sidbi, which was allocated a $ 15,000-crore window to be used to lend to non-banks, limited the tenor of these loans to 90 days, making it a complete non-starter.

“Banks have neither sufficiently utilized facilities from RBI or government nor used their own liquidity to lend to their existing long-standing NBFC customers and have cited grounds as breach of sectoral thresholds,” the letter states.

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