NBFCs seek to partially reopen on block

Mayur Shetty | TNN

Mumbai: With uncertainty about lifting the blockade next week, financial companies have written to the ministry of internal affairs to obtain permission to remain partially open amid the closure to cater to the growing financial requirements of a larger segment of revenue clients low and medium.

The Financial Industry Development Council (FIDC) noted that they are working for a few hours with limited resources while funding requirements are growing at a rapid rate. In the financial sector, the government has allowed banks, insurance companies and stock market intermediaries to continue operating during the Covid-19 blockade.

NBFC's clients are primarily small or commercial or passenger vehicle operators who visit our branches to pay EMI for cash loans, Mahesh Thakkar, CEO, FIDC, said in the letter. He added that they could operate with 30% of personnel while maintaining social distancing.

they face on multiple fronts. Its operations are affected by the blockade. They cannot recover from their borrowers as they have extended a three-month moratorium on creditors according to the circular. However, banks are excluding financial companies from the three-month moratorium until the end of May, which allow all other borrowers.

The rating agency has described this as a double whammy for financial companies and issued a credit alert for the sector. Crisil's analysis of the qualifying NBFCs shows that liquidity pressure will increase by almost a quarter of them if collections fail to recover in June 2020. These NBFCs have debt obligations of 1.75 lakh crore of maturities by then, he said. the rating agency in a statement.

Given the challenges in accessing new funds, and boasting zero collections, the Crisil study underscores that several NBFCs will face liquidity challenges if they do not obtain a moratorium on servicing their own bank loans and are forced to meet all debt obligations on time, said the senior director of Crisil.

The Association of Indian Banks, justifying the exclusion of financial companies from a moratorium, said that a facility of Rs 1-lakh-crore is available through RBI's long-term repo operations window (TLTRO). The TLTRO facility allows banks to refinance debts, including those to finance companies. “However, only half of that goes to primary emissions. Furthermore, an expected fight for funds means that companies and government financiers will also be interested in this window. Consequently, only the highest rated NBFCs can end up benefiting, ”Crisil said.