Unwilling banks to seek their board view on moratorium on NBFC

Bankers going back to their boards after Reserve Bank of India conveyed to them that even non-bank financing companies (NBFCs) are covered by “borrowers” ​​who are eligible for moratorium, opens an opportunity for struggling non-bank providers to stay afloat.

During a video conferencing meeting, central bank officials also told bankers that they could use their discretion to decide if businesses were justified on the basis of their credit and liquidity profile, several people familiar with the matter said.

the RBI relocation follows complaints from the NBFC sector that they were deprived of the moratorium made available to the regulator for all borrowers from paying principal and interest rates between March 1 and May 31 following the temporary closure of companies to prevent the spread of Covid 19th

The central bank’s push may also have come to avoid a plethora of lawsuits like some NBFCs had sought legal intervention to gain the benefits of the moratorium in the absence of banks delivers it on your own.

“The RBI has left it at the discretion of the banks,” said a bank manager who attended the meeting on Saturday, called by the regulator to review the implementation of the payment moratorium and to urge banks to increase credit flows as closure is lifted in phases.

Some banks, which had previously denied NBFCs and microfinance firms the benefit of moratorium on payments, have called in their board meeting this week to review the case. Banks can consider requests from them on a case-by-case basis, top bankers told ET.

But all eyes will be on the state Bank of India as it has the largest share in the industry.

“The only clarity from the governor’s meeting is that banks have been given the freedom to decide to extend the moratorium on NBFCs. But it all depends on what the big banks are doing. State Bank of India’s position on this is very crucial as it has a lion’s share of the market, “said another senior bank director in the public sector.

Bankers have been split over the issue ever since the RBI created the possible provision on March 27 for lenders to extend the moratorium on payment to stressed borrowers.

One section felt that NBFCs should have been offered the benefit from the start, while others were against it. Foreign banks and some public banks have been too.

The banks that opposed it have argued that NBFCs with unutilized loan limits or with enough cash flow should not get it.

Banks’ lending to the NBFC rose in March, the highest in the month since 2008, when the shadow lending industry collapsed before the end of the financial 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.

“This moratorium on payment is foreseen for borrowers in stress. We will definitely offer them the benefit when they really need it, ”said a bank manager.

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