NBFCs seek to reopen partially in lockdown – Times of India

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MUMBAI: With uncertainty over the lockdown being lifted next week, finance companies have written to the home affairs ministry for permission to remain partially open amid the lockdown to cater to the rising financial requirements of a larger segment of lower- and middle-income customers.
The Finance Industry Development Council (FIDC) pointed out that banks are working for some hours with limited resources while the funding requirements are growing at a rapid pace. In the finance sector, the government has allowed banks, insurance companies, and stock market intermediaries to continue to function during the Covid-19 lockdown.
“NBFC customers are primarily small truck or commercial or passenger vehicle operators who visit our branches for paying loan EMIs in cash,” said Mahesh Thakkar, director-general, FIDC, in the letter. He added they could operate with 30% staff while maintaining social distancing.
NBFCs are facing pressure on multiple fronts. Their operations are hit because of the lockdown. They are not able to recover from their borrowers as they have extended a threemonth moratorium to creditors in line with RBI’s circular. However, banks are excluding finance companies from the three-month moratorium till end of May, which they are allowing for all other borrowers.
Ratings agency Crisil has described this as a “double whammy” for finance companies and issued a credit alert for the sector.
“Given the challenges in access to fresh funding, and presuming nil collections, Crisil’s study underscores that a number of NBFCs will face liquidity challenges if they do not get a moratorium on servicing their own bank loans and are forced to meet all debt obligations on time,” said Krishnan Sitaraman, senior director, Crisil.
The Indian Banks Association, justifying the exclusion of finance companies from a moratorium, said that a Rs 1-lakhcrore facility is available through RBI’s targeted long-term repo operations (TLTRO) window. The TLTRO facility allows banks to refinance debt including those to finance companies. “However, only half of that is earmarked for primary issuances,” Crisil said.

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