Elets Exclusive Effect: Banks agree to offer moratorium to NBFCs

Raising their concern on the low availability of moratorium despite the Reserve Bank of India’s approval, Heads of India’s leading Non-Banking Financial Companies (NBFCs) spoke about the challenges faced by the sector during a Live Webinar organised by Elets Technomedia in association with The Banking & Finance Post magazine on May 1, 2020.

Within a week of this Live webinar, leading Public Sector banks have finally agreed to offer moratorium to NBFCs. On behalf of Elets Technomedia, Senior Assistant Editor, Souvik Goswami moderator the virtual discussion.

Lenders namely the State Bank of India (SBI) and Punjab National Bank are the first few names to be a part of this latest development.

The executive committee of the State Bank of (SBI) board has given their approval to the Reserve Bank of India granted moratorium to NBFCs which apply for the same.

Similarly, Punjab National Bank has also extended the moratorium to Non-Banking Finance Companies (NBFC) after the Reserve Bank of India cleared the doubts pertaining to the issue on Saturday.

The second-largest Public Sector Lender has communicated to its NBFCs clients about the development this week.

Discussion pertaining to the moratorium and the challenges faced by the NBFCs who are already facing the cash crunch situation were the highlights of the Webinar organised by Elets.

Expressing his views on moratorium T.T. Srinivasaraghavan, Managing Director, Sundaram Finance Ltd said, “It is important from our end to think that whenever the economy gets back to track, we need capital to trigger growth in the economy. NBFCs need capital and unfortunately due to moratorium, the collections are hampered. It is actually critical for the NBFCs to come out of the situation. If the capital is not coming, nothing will help. NBFCs are very critical for the realization of Financial Inclusion. Everybody is talking about the bigger canvas and expressing their views on digital growth. People at the bottom of the pyramid are not comfortable using digital. If everything goes digital a large section of the society will suffer so, digitisation is a good desire but it cannot be achieved overnight.”

Managing Director of one of India’s leading NBFCs, George Alexander Muthoot from Muthoot Group said, “Through the moratorium, the RBI is willing to give money to the NBFCs through banks but the banks are getting overcautious because they don’t want to add to their bad loans. In my view, the centre should extend the moratorium time period meant for the banks so that they get into a comfortable possible.

Besides, it is also significant to take care of several small level enterprises as if they die it will be very difficult to bring them back to the situation. We should work out and put some pressure on keeping the funding back on track.”

Prabhakar Bobde, Chief Executive Officer, Sustainable Agro-Commercial Finance Ltd stated, “The regulator has allowed moratorium to the people but we are not able to avail it as we are not getting it from the banks. We are delaying our cash flows but we don’t have the capital. Banks have the capital with them but they are not lending cash only to large NBFCs in a bid to avoid Non-Performing Assets. It is important for the government and Reserve Bank of India (RBI) to build confidence in the banks so that they can lend the NBFCs. NBFCs are the best channel for the government to send money to the bottom of the pyramid.”

Raman Aggarwal, Chairman, Finance Industry Development Council suggested the creation of a special credit line for NBFCs for dealing with the liquidity crunch.

“The liquidity challenge which was a challenge before the pandemic is still a concern during the outbreak. The regulator’s sector-specific approach towards the cash crunch and related problems is commendable. In my view, the centre will have to look into the matter and think about ensuring a specific credit line to the NBFCs. The guaranteed effort gives some comfort to the NBFCs. Banks have liquidity and they are funding big NBFCs but there is a need to look at the liquidity for small and medium NBFCs,” he added.

For dealing with the situation efficiently, it is important to engage with your employees and client opined Sachin Pillai, Chief Executive Officer, Hinduja Leyland Finance.

“It is good to see that apart from health measures, the realization of the livelihood part is also taking the center stage. It is true that we have not seen anything like this in the past. And presently none of us has the capacity to say what will be the gravity of the crisis and its effect on the country’s economy. It is also difficult to give an estimate of its adversities on the NBFC sector and projections on the recovery of the industry. It is apt to say that these times are unprecedented. All of us in the last two months of the financial year made plans on the outlook of the sector but now we are dealing with a situation where we don’t know how the things are going to turn up. There are no possible figures that are indicating the growth or comeback of the sector from the situation. During this time, it is very important for us to engage our employees, customers, and channel partners. Not only from the perspective of giving them confidence and comfort to help them come out of the fear but also to get a clear understanding of the happenings in their own sphere of life and action,” said Pillai.

The Banking & Finance Post is an initiative of Elets Technomedia Pvt Ltd, existing since 2003.
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