Finance Industry Development Council, on May 29, had requested the Finance Minister for allowing one-time restructuring of loan repayment terms in a bid to help the Non- Banking Financial Companies (NBFCs) to provide liquidity support to their borrowers who are facing a massive liquidity crunch due to the outbreak of covid-19 pandemic which resulted in nationwide lockdown.
FIDC is a representative body of asset and loan financing NBFCs,
“Our field surveys during last 4-6 weeks have revealed that NBFCs need working capital support to get back to normalcy post lockdown and they are not sure of their cash flows due to disruption in their biz cycles and have requested to be given time to restart and gradually come back to 100% level of operations,” said FIDC note.
The body, therefore, has asked for the permission from the ministry to allow one-time restructuring of loan repayment terms without any additional provisioning.
“RBI circular dated February 11, 2020, does allow one time restructuring for MSMEs registered with GST upto December 31, 2020, without any downgrade but with 5% additional provisioning. Our request is to expand the scope to all loans (and not only MSMEs) and that too without any additional provisioning. We have already represented to RBI in this regard, and now we hereby seek your intervention and support in this regard,” added FIDC.
Besides, FIDC had sought for an extension of the tenure of the Rs 30,000-crore special liquidity scheme to three years as against three months currently citing reasons that the tenure of the NBFCs debt to be acquired by the special purpose vehicle is just 3 months whereas NBFCs lend for an average tenure is of 3 years and this would not result in additional cashflow.
“May provide relief to existing holders of short term NBFC debt instruments to sell but not result in fresh lending to MSMEs.”
The body also suggested that the unsecured loans should also be included under the scheme and primarily for the bottom end of the MSME segment.
“We submit that all individual borrowers who are at the bottom end of the MSME chain should also be covered under the scheme so that they can benefit as well and NBFCs which are the principal source of funding for them can provide it to their customers,” FIDC added.
It said that the lenders should be followed for providing additional funds to their existing NBFC customers to the tune of 20 percent of existing limits under targeted long-term repo operations (TLTRO 2.0) without any appraisal and collateral security, the industry body requested.