The NBFCs are seeing opportunities open up and preparing to lend new loans in June

Mumbai | Kolkata: Top non-bank finance companies are reintroducing the sanction of fresh loans in June, with sentiment boosted by government stimulus and easing shutdowns, even as they pull cautiously, aware that repayment capacity may have been weakened by job losses and income declines . The Edelweiss Group, Mahindra Finance, IIFL Finance and Shriram Transport Finance have begun to pay off loans with their clients demanding that they be demoted to the limits sanctioned in March. Companies expect double-digit loan growth in the September quarter or early December quarter.

Microfinance Companies have also begun to pay off emergency loans to help grassroots borrowers tide over the immediate crisis. “We will summarize our new loan sanctions from June,” said Umesh Revankar, CEO of Shriram Transport Finance. “We see opportunities that open up in rural and semi-urban areas that are not badly affected by Covid-19. Truck movements will increase, aided by the government’s stimulus package and ease the shutdown. “The economy was set after a nationwide shutdown that began on March 25. Shriram finances second-hand vehicle purchases and expects total loan extension to below 5%, although pace is expected to increase by double digit credit September quarter growth. The closure of regional transport offices during the first two phases of the shutdown brought Shriram’s business activities to an end.

“We aim to achieve 8-10% credit growth by the September quarter,” said Rashesh Shah, chairman of the Edelweiss Group. “Our clients are gradually returning to work, resulting in resumption of loan needs.” Edelweiss Finance plans to begin sanctioning new loans from June, as a quarter of its customers are back in action. It will reopen 20% of its branches in smaller cities by the end of this month.

Credit and refinancing facilities from Small Industries Development Bank of India (Sidbi) and the National Bank for Agriculture and Rural Development (Nabard) have been operational, bridging the liquidity gap, creating a mismatch between demand and supply until April, said captains in the sector. “We all need to build trust first and turn the mood into positive,” said Ramesh Iyer, CEO of M&M Financial. The government’s stimulus helped in that direction. We are also reinvesting product design and services. ”

The company now allows new tractor customers to start repayment after a month and a half. Mahindra Finance is sanctioning two-month-old loan requests, though it gets new loan requests from agricultural holdings. “We have already started digital loan sanctions for existing customers with a credit track record,” said Nirmal Jain, president of the IIFL Group, which has resumed its operations in half of its 1,800 branches.

NBFCs even below the top row, they are ready to borrow again, with the government’s credit guarantee program likely to increase their cash flow. The RBI’s targeted long-term repo operation for smaller businesses (TLTRO 2.0) will get a better response now that the risk would be borne by the government in whole or in part, people familiar with the matter said. “The special liquidity support for lower rated NBFCs will mean that banks do not have to take credit risk and NBFC securities are likely to be used up,” said Sanjay Chamria, CEO of Magma Fincorp.

NBFCs open branches mostly in the smaller towns and cities that are not badly affected by the outbreak. In cities, they have resumed activities in green and orange zones, which have fewer Covid-19 cases. Local branch managers are now empowered to make branch-opening decisions, especially in rural and semi-urban areas.

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