NBFCs seek to partially reopen on block
MUMBAI: With uncertainty about the closing of the closure next week, financial companies have written to the Ministry of Internal Affairs to allow it to remain partially open in the middle of the closure to meet the growing financial requirements of a larger segment of income clients low and mid.
The (FIDC) noted that banks are working for a few hours with limited resources, while financing 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 truck operators or commercial or passenger vehicles that visit our branches to pay the EMI of cash loans, CEO FIDC said in the letter. He added that they could operate with 30% of personnel while maintaining social distancing.
The NBFCs face pressure on multiple fronts. Its operations are affected by the blockade. They cannot recover from their borrowers as they have extended creditors a three-month period according to the RBI circular. However, banks are excluding financial companies from the three-month moratorium until the end of May, which allow all other borrowers.
The credit rating agency Crisil described this as a double whammy for financial companies and issued a credit alert for the sector.
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.
He, justifying the exclusion of financial companies from a moratorium, said that a Rs 1-lakhcrore facility 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, Crisil said.