NBFCs move RBI; seek loan recast, liquidity cushion as COVID-19 wreaks havoc

Non-banking financial companies (NBFCs) have moved the RBI (Reserve Bank of India), seeking loan restructuring for a second time. The NBFCs have also solicited fresh liquidity support for on-lending to smaller companies.

The Finance Industry Development Council (FIDC), a representative body cum self-regulatory organisation for NBFCs, has written to the central bank seeking fresh relief measures.

The request has been raised in the wake of the massive uptick in COVID-19 cases across the country and the subsequent lockdowns announced by state governments. The main demands of the NBFCs comprise permitting restructuring of loans for retail borrowers of shadow lenders, regardless of whether such accounts have been restructured on previous occasions or not.

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"Considering the severe second wave of Covid-19, retail borrowers, including MSMEs, as well as the retail and wholesale trader industry, will be in urgent need of support from the lenders to revive their economic activities. In this challenging environment for borrowers and lenders, in general, it will be helpful, if the RBI extends the August 6, 2020, notification on one-time restructuring till at least March 31, 2022," FIDC stated in a letter to RBI Governor Shaktikanta Das, the Business Standard reported.

The body also noted that borrower accounts, despite the fact that they were restructured during the first COVID wave, and if they are standard as of March 31, 2021, should be recast without any downgrade in asset classification.

Also Read: NBFCs seek MSME restructuring scheme extension till March 2022

FIDC has also sought restructuring for small NBFCs with an asset size of less than Rs 500 crore, and those who rely on banks for financing, else it may create an asset-liability incongruity for such institutions.

".....these small NBFCs may be given the benefit of getting their loans restructured (one time) from banks and FIs. This shall ensure that these small NBFCs remain eligible for further bank finance, there is no mismatch in their asset-liability position and thus help them support their wholesale and retail borrowers with fresh credit", FIDC stated.

Seeking liquidity cushion for the shadow banking sector for on-lending to MSMEs, the industry body has also sought an increase in RBI's outlay for AIFIs (All India Financial Institutions) from Rs 50,000 crore to Rs 75,000 crore.

"While the existing allocation for other sectors may continue at their prescribed limits, additional Rs 25,000 crores may be made available exclusively to medium and small NBFCs, through SIDBI for a period of 3 years", FIDC said.