Non-banking finance companies (NBFCs) have once again reached out to the Reserve Bank of India to provide some relief as the second wave of the COVID-19 continues to impact the industry, borrowers. In a letter addressed to RBI Governor Shaktikanta Das, the industry body for NBFCs, Finance Industry Development Council (FIDC) said, “The second wave of COVID-19 has already started impacting the industry, more so the above self-employed segment of customers having little or nothing to fall back upon." CNBC-TV18 has reviewed a copy of this letter.

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"About 60 percent of branches of national NBFCs are locked down. We have told RBI we need a comprehensive set of measures," Sanjay Chamria of Magma Fincorp and Co-Chairman of FIDC said.

First, FIDC has requested the RBI to consider extending the one-time restructuring scheme, which ended on March 31, to retail borrowers. It had already made a similar request for MSME customers.

“The borrower accounts, irrespective of whether or not such accounts had been restructured on any earlier occasion and which are “standard” accounts as on March 31, 2021, maybe allowed restructuring without any downgrade in asset classification, subject however to the lending NBFCs undertaking fresh credit assessment of the borrowing entity,” it said. It has also asked for a standstill on such restructured loans until the first quarter of the financial year 2021-2022.

Second, FIDC has requested RBI allow banks and other financial institutions that NBFCs themselves borrow from, to restructure their loans, especially for smaller NBFCs with asset sizes of under Rs 500 crore.

"The only mode of borrowings for the small NBFCs is to raise term loans from banks, Financial Institutions like SIDBI, NABSAMRUDDHI and NABKISAN and large NBFCs. They do not access to the capital markets and neither do they issue bonds/debentures etc. We, therefore, submit that 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 said in its letter.

Third, FIDC has requested further liquidity support to on-lend to MSME borrowers from RBI.

“We urge the RBI to increase the overall support outlay to AIFIs from Rs 50,000 crore to at least Rs 75,000 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 a period of 3 years,” it said.

The rising Covid-19 cases in April 2021 has again raised concerns on the asset quality of the retail loans of NBFCs and housing finance companies (HFCs) given the increasing instances of lockdowns in various cities coupled with a gradual rise in severity of such restrictions by some state governments, ICRA had recently said in a report.

Expanded curbs could derail the fragile recovery in India’s NBFC sector since a nationwide lockdown was gradually relaxed from mid-2020, rating agency Fitch said earlier.

“SMEs (small and medium enterprises), commercial vehicle operators, microfinance, and other wholesale borrowers remain at greater risk of stress in this environment, particularly as financial buffers would have narrowed after the severe economic shock over the past year. Production and supply chains remain susceptible to labour shortages if the large-scale urban-to-rural labour migration in 2020 recurs,” Fitch said.

First Published:Apr 27, 2021 3:32 PM IST