NBFCs ask RBI for extended recast scheme, more liquidity support

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

As the impact of the latest wave of Covid infections starts to play out, non-banking financial companies (NBFCs) have asked the central bank to allow a fresh round of loan restructuring for businesses and consumers undergoing stress. In a letter to the Reserve Bank of India (RBI), industry association Finance Industry Development Council (FIDC) has also sought liquidity support for on-lending to small businesses.

“It is feared that this second wave of Covid will peak sometimes in May and then possibly start climbing down in June. It will not be long before the NBFC industry starts reeling under pressure of increased NPAs (non-performing assets) and at the same time, handling demand of moratorium and/or restructuring from its existing and deserving customers,” FIDC said in its representation. It explained that a large number of borrowers in the NBFC segment are truck or taxi owners/drivers, machine operators, marginal farmers, small shopkeepers, stockists, local contractors and workshop owners. These categories of professionals are being hit by localised and state-wide lockdowns mandated in parts of the country, FIDC said.

The industry has requested that borrower accounts be allowed to undergo restructuring without any downgrade in asset classification, irrespective of whether they had been restructured on any earlier occasion as long as they were standard accounts as on March 31, 2021. It also suggested that the RBI could look to prescribe broad parameters for credit assessment of such accounts on the lines of recommendations made by the KV Kamath committee. This would help standardise the approach followed by lenders. They have also sought a standstill on asset classification of restructured accounts in Q1FY22.

The other requests are to ask banks and financial institutions to allow a one-time restructuring of loans given by them to NBFCs with a total asset size of under Rs 500 crore, and to increase the overall support outlay to all India financial institutions (AIFIs) to at least Rs 75,000 crore from Rs 50,000 crore. “While the existing allocation for other sectors may continue at their prescribed limits, the additional Rs. 25,000 crore may be made available exclusively to medium and small NBFCs, through SIDBI for period of three years,” FIDC said.

Lockdowns and other restrictions on mobility have already begun to hurt NBFCs’ collections. The microfinance sector’s collection efficiency has stalled at 90-94% in the past few months compared with the pre-pandemic level of 98-99%, Crisil Ratings said in a report earlier this month. Lenders are also likely to turn cautious again as during the first wave, particularly in the personal loan and business loan segments, analysts said. “As far as the SME business is concerned, it remains lackluster as lenders are shying away from new customers, while existing customers have already been extended the ECLGS (emergency credit line guarantee scheme) benefit, leaving no further scope to lend to existing customers,” Emkay Global Financial Services said in a recent report.