Retail borrowers of NBFCs need urgent support: FIDC to RBI

Mumbai: The Finance Industry Development Council (FIDC) has written to the Reserve Bank of India seeking restructuring of stressed retail and individual borrowers of non-banking finance companies, irrespective of whether these loans have been restructured earlier.

In a letter written to the RBI Governor Shaktikanta Das, the industry body also requested loan recast for smaller NBFCs, having asset size of less than Rs 500 crore.

“Considering the severe second wave of COVID-19, the retail borrowers, including the MSMEs, as also the retail and wholesale trader industry shall be in urgent need of support from the lenders, to revive their economic activities,” FIDC said requesting extension of the restructuring scheme till March 31, 2022.

It said 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, may be allowed ‘restructuring’ without any downgrade in asset classification.

However, this will be subject to the lending NBFCs undertaking fresh credit assessment of the borrowing entity, it said.

The industry body urged the RBI to allow standstill on buckets for restructured accounts for the first quarter of FY22.

The letter further said the only mode of borrowings for the smaller NBFCs (having asset size of less than Rs 500 crore) is to raise term loans from banks, financial institutions like Sidbi, Nabsamruddhi and Nabkisan and large NBFCs. These smaller players do not have access to the capital markets and they do not issue bonds.

“We therefore submit that these small NBFCs may be given the benefit of getting their loans restructured (one-time) from banks and financial institutions (FIs),” the FIDC said.

It said the restructuring will ensure that these small NBFCs remain eligible for further bank finance, there is no mismatch in their asset liability position and will help them to support their wholesale and retail borrowers with fresh credit.

The industry body also urged the RBI to increase the overall support outlay to All India Financial Institutions (AIFIs) – Nabard, Sidbi, NHB and Exim Bank- 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 R. 25,000 crore may be made available exclusively to medium and small NBFCs, through Sidbi for a period of three years,” the letter said.

Earlier this month, RBI had extended a support of Rs 50,000 crore to the AIFIs for new lending in 2021-22.