Non-banking financial companies (NBFCs) have asked the Reserve Bank of India to allow them one-time restructuring of all loans till March 2021, as their borrowers are facing funding issues amid the coronavirus pandemic and the subsequent lockdown.
NBFCs have also demanded for extension of the Reserve Bank of India's moratorium to them, relaxation on provisioning norms and additional funding from Small industrial Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) through refinance mechanism.
These suggestions were made by the industry players in their meeting with the Reserve Bank of India (RBI) held on Monday, according to the Finance Industry Development Council (FIDC), a representative body of lending NBFCs. The industry body said all their customers are facing disruptions in cash flow cycles, which is likely to be there for the major part of this fiscal. The most affected segments include transport operators, contractors and Micro, Small & Medium Enterprises (MSMEs).
"A one-time restructuring window should be allowed till March 2021 for amending the loan repayment schedules and/or extending loan tenures or restructuring the EMIs, without affecting the asset classification, in line with the revised expectation of cash flows of our customers," FIDC said in a statement. Currently, RBI has allowed banks and NBFCs for a one-time restructuring of existing loans to MSMEs till December 2020.
NBFCs want that the one-time restructuring should be allowed for all other borrowers as well. While the three-months moratorium has provided some relief to borrowers, they may not be in a position to commence loan servicing from the fourth month on account of the disruption, FIDC said.
It said the experience of targeted long term repo operations (TLTRO 2.0) clearly indicates risk aversion on the part of banks. In the first auction of TLTRO 2.0, RBI had received Rs 12,850 crore worth of bids, as against the notified amount of Rs 25,000 crore. "RBI should consider providing funds to a refinance mechanism through SIDBI, NABARD and their associate institutions which can provide long-term loans to NBFCs for their on-lending operations," the sector has requested the RBI.
Also, the central bank should consider allocating the unsubscribed part of TLTRO 2.0 to SIDBI and NABARD. RBI, on April 17, announced to provide special refinance facilities for a total amount of Rs 50,000 crore to NABARD, SIDBI and National Housing Bank (NHB) to enable them to meet sectoral credit needs. NBFC players have also requested RBI that they should be given moratorium on their liabilities as well to ensure financial and liquidity stability to the sector.
Last month, RBI had asked banks and NBFCs to maintain provisions of up to 10 per cent on 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. NBFCs said given the nature of their borrowers and their businesses, it is routine for them to pay the EMIs a few days later. This usually happens due to various local factors (such as a truck operator's prolonged absence from home while driving the truck) and is not to be seen as a sign of credit risk, they said.
A very substantial number of such customers service the loans before they become 30 days past due, the industry said while requesting a permission to make provisions, where moratorium has been given, only on loans that are 30 or more days past due.