Extending the RBI announced three-month moratorium on loans from banks to NBFCs has been an effort between the banks, as some large lenders led by SBI have refused to extend it to NBFCs, citing the misuse of these borrowers.
SBI argued that unlike non-financial corporations, NBFCs have not been totally affected Lockdown As some borrowers, just as they are servicing their bank loans, they also continue to repay NBFCs.
It was difficult to check how much of the loans were repaid by NBFCs. Some back managers were also afraid that mostly NBFCs, promoter-controlled, would direct the cash flow gains out of the moratorium to their other companies or pay down other borrowers as from the bond market.
“These concerns have so far kept NBFCs out, but things have gotten worse now, and then there is a recognition that these companies need the moratorium to survive. A Supreme Court order has also been made to extend the moratorium to everything, which means extending it to NBFCs is a final deal now, “said a bank director who was closely involved in these negotiations.
Last week, the Supreme Court ordered the RBI to ensure that its circular on loan moratorium was implemented in “letter and spirit”, increasing pressure on banks to extend the leeway to all borrowers without distinction.
The RBI’s reluctance to clarify its stance on the moratorium on NBFCs had also led to confusion over the issue with the central bank, which privately hinted to banks that it was okay with the facility not being extended to NBFCs.
However, in a meeting with bank executives on Saturday, RBI Governor Shaktikanta Das said that bank boards can take their own call for extending moratorium on NBFCs. SBI has now decided to request approval from its decision-making committee and put the moratorium in effect for NBFCs.
“This will mostly be approved. It’s just a formality,” said the quoted person above.
Other public banks will also extend the benefits NBFC customers. “SBI is the largest bank with a 40% share of NBFC lending. If they don’t do anything, it’s hard for us to do that. When they do, we have no reason not to. It’s only fair to we extend this facility to NBFCs as they extend it to their borrowers, ”said a senior executive at a public bank.
The banking sector’s exposure to NBFC is among the highest.
Recent data shows that banks’ lending to NBFCs rose in March, the highest in the month since 2008, when the shadow lending industry collapsed before the end of the fiscal year.
Total lending rose 4 per cent in the same period by Rs 3.57 lakh crore, RBI data shows. While NBFC made up 32 percent of the total, loans to the industry also rose, including loans to MSMEs.
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