Covid-19: NBFCs request RBI for a one-time restructuring of all loans through March 2021

MUMBAI: Non-bank financial companies (NBFCs) have asked the Reserve Bank of India to allow them a one-size-fits-all restructuring until March 2021, as they face financing problems amid the coronavirus pandemic and subsequent blockade .

The NBFCs have also demanded the extension of the Reserve Bank of India moratorium, the provisioning and additional financing rules of the Small Industrial Development Bank of India () and the National Bank for Agriculture and Rural Development ( NABARD) through the refinancing mechanism.

These suggestions were made by industry players at their meeting with the Reserve Bank of India (RBI) on Monday, according to the Financial Industry Development Council (), a representative NBFC loan agency.

The industry body said all of its clients face disruptions in cash flow cycles, which will likely be there for most of this fiscal year. The most affected segments include transport operators, contractors and micro, small and medium-sized enterprises (MSMEs).

A single restructuring window should be allowed until March 2021 to amend loan repayment schedules and/or extend loan terms or restructure EMIs, without affecting asset classification, in line with the revised expectation of flows. of cash from our clients. FIDC said in a statement.

Currently, RBI has allowed banks and NBFCs a one-time restructuring of existing loans to MSMEs through December 2020.

The NBFCs want the single restructuring to be allowed to all other borrowers as well.

While the three-month moratorium has provided some relief to borrowers, they may not be in a position to start loan service beginning in the fourth month due to the disruption, FIDC said.

He said that the experience of specific long-term repos operations (TLTRO 2.0) clearly indicates banks' aversion to risk. In the first TLTRO 2.0 auction, RBI had received offers worth Rs 12.850 crore, compared to the reported amount of Rs 25,000 crore.

RBI should consider providing funds to a refinancing mechanism through SIDBI, NABARD and their partner institutions that can provide long-term loans to NBFC for their lending operations, the FIDC asked RBI.

In addition, the central bank should consider assigning the unsubscribed portion of TLTRO 2.0 to SIDBI and NABARD.

RBI on April 17 announced that it will provide special refinancing services for a total amount of Rs 50,000 crore to NABARD, SIDBI and (NHB) so that they can meet sector credit needs.

The NBFC players have also asked RBI to be given a moratorium on their responsibilities and to ensure the sector's liquidity and financial stability.

Last month, RBI had asked banks and NBFCs to maintain provisions of up to 10 percent in all accounts that are at least 1 day past due and where a moratorium has been granted. The provision will be spread over two quarters: March 2020 and June 2020.

NBFC said that given the nature of their borrowers and their businesses, it is routine for them to pay IMEs a few days later.

This generally occurs due to various local factors (such as the prolonged absence of a truck operator from his home while driving the truck) and should not be seen as a sign of credit risk, they said.

A very large number of such clients service loans before they are 30 days past due, the industry said in applying for a permit to make provisions, where a moratorium has been granted, only on loans 30 or more days past due.