Many banks have started offering moratorium to non-banking finance companies and housing finance companies after the RBI announced a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. However, many banks were uncertain of whether it meant that the facility would be extended to NBFCs, HFCs and microfinance players.

NBFC and HFC players told BusinessLine that it is mostly state-run banks have begun to offer a moratorium on loans given to them.

“Most lenders are now inclined to extend the moratorium. Four lenders have also communicated this to us, but we have sufficient cash to pay the instalment for March, April and May,” said Deo Shankar Tripathi, MD and CEO of Aadhar Housing Finance, adding that many banks are looking into the issue and examining which accounts would require the moratorium.

“We are hearing from our members that some banks have begun to extend the moratorium,” said Mahesh Thakkar, Director General, Finance Industry Development Council.

RBI Governor Shaktikanta Das had on March 27 in the Seventh Bi-monthly Monetary Policy Statement, 2019-20 had announced a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.

But with many banks uncertain of whether it meant that the facility would be extended to NBFCs, HFCs and microfinance players, the liquidity squeeze for many of these shadow lenders persisted.

An FAQ document issued by the IBA created further confusion as it had suggested that NBFCs and HFCs are not eligible for deferment of interest on working capital loans.

On the one hand, NBFCs and HFCs had to extend the moratorium to their own borrowers, and on others, they had to pay the instalments of their own loans.

A meeting of the Indian Banks’ Association on April 18 to discuss the issue failed to reach a consensus on how banks should proceed.

Official sources said that it was expected that each bank’s board had to decide and amend their policy on the moratorium based on the RBI announcement.

“The RBI circular has clearly mentioned that all term loans should be included in the moratorium, so there should not have been any confusion and a need for a meeting by the IBA,” persons close to the development noted, pointing out that banks in the past too have been selective on following up on announcements by the RBI.

Analysts said that they too are not sure what has led to the confusion on the issue.

“It has been three weeks since the RBI came out with the circular on March 27 and banks are still not clear what has to be done. We are not sure what triggered the confusion on extending the moratorium. Some banks seem agreeable to extending the moratorium while some are taking a different stance. For NBFCs, the RBI has also given the LTRO route. With about 60 to 65 per cent of overall bond issuances for the financial sector, there could be some thinking that funding for liquidity can come from the LTRO route. But we can only keep guessing,” said Karthik Srinivasan, Senior Vice President, Group Head - Financial Sector Ratings, ICRA.

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Published on April 23, 2020