NBFCs have also demanded an expansion of the Indian Reserve Bank of moratorium on them, easing of provisioning standards and additional funding from the Small Industrial Development Bank of India (SIDBI) and National Bank for Agriculture and rural Development (NABARD) through refinancing mechanism.
These suggestions were made by industry players in their meeting with the Reserve of India (RBI) held on Monday according to Finance Industry Development Council (FIDC), a representative body for lending NBFCs.
The industry agency said all of their clients are facing disruptions in cash flow cycles, which is likely to be there for most of this fiscal. The most affected segments include transport operators, contractors and Micro, Small & Medium Enterprises (MSME).
“A one-time restructuring window should be allowed until March 2021 to change loan payment schedules and / or extend loan periods or restructure EMIs without affecting the asset classification in line with the revised expectation of cash flow from our clients,” FIDC said in a statement.
Currently, RBI has allowed banks and NBFCs for a one-off restructuring of existing loans to MSMEs until December 2020.
NBFCs want the one-off restructuring to be allowed for all other borrowers as well.
While the three-month moratorium has given borrowers some relief, they may not be able to begin loan servicing from the fourth month due to the disruption, the FIDC said.
It said the experience of targeted long-term repo operations (TLTRO 2.0) clearly indicates risk oversight by banks. At the first TLTRO 2.0 auction, RBI had received bids worth Rs 12,850 crore against the reported amount of Rs 25,000 crore.
“The RBI should consider providing funds for a refinancing mechanism through SIDBI, NABARD and their associated institutions that can provide long-term loans to NBFCs for their lending transactions,” the sector has requested the RBI.
The central bank should also consider allocating the non-subscribed portion of TLTRO 2.0 to SIDBI and NABARD.
On April 17, RBI announced providing special refinancing facilities for a total amount of Rs 50,000 crore to NABARD, SIDBI and National Housing Bank (NHB) to enable them to meet sectoral credit needs.
NBFC players have also requested RBI that they should have provided moratorium on their obligations as well as to ensure financial and liquidity stability in the sector.
Last month, RBI had asked banks and NBFC to maintain provisions of up to 10 percent on all accounts that are at least 1 day overdue 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 business, it is routine for them to pay the EMIs a few days later. This usually happens due to various local factors (such as a truck operator’s prolonged absence from home while driving) and is not to be considered a sign of credit risk, they said.
A very large number of such customers serve the loans before they become 30 days past due, the industry said, while requesting permission to make provisions where moratoriums have been granted only on loans that are 30 or more past due.
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