NBFCs, HFCs welcome RBI move on improving liquidity

Surabhi Mumbai | Updated on April 17, 2020

Banks may have to take call on extension of moratorium

The slew of announcements by the Reserve Bank of India (RBI) on Friday seem to have addressed a majority of concerns of non-banking finance companies (NBFC) and micro finance players although it did not resolve the issue of extending a moratorium to them.

Sources close to the development said that banks may take a call on whether or not to extend the moratorium to NBFCs and MFIs. The Indian Banks’ Association may discuss the issue in the coming days.

“The RBI announcements on liquidity have taken care of about 60 per cent to 70 per cent of concerns of NBFCs. We are awaiting the operational guidelines to get a better understanding,” said Mahesh Thakkar, Director General, Finance Industry Development Council.

CARE Ratings said that many NBFCs and housing finance companies are in talks with their banks to avail the moratorium, however, it is not an automatic decision from the banks and there may be a differential behaviour by banks.

“The RBI, however, has announced measures like the Targeted Long Term Repo Operations 2.0 and funding being made available to the likes of SIDBI, NABARD & NHB for on-lending to NBFCs/HFCs. These measures would help channel some liquidity to NBFCs/HFCs,” it said.

The challenge is post the moratorium period, assuming the country-wide lockdowns end by May 2020 and businesses start to operate, it may take some time for collection efficiencies to reach normal levels, it noted.

Lakshmi Iyer, Chief Investment Officer (Debt) and Head Products, Kotak Mahindra Asset Management Company also said the announcement of the TLRTO 2 directed towards the NBFC sector is a much needed initiative given the Covid related moratorium optionality that this sector had to offer its borrowers. “This should allow for more broad based availability of liquidity under this facility,” she said.

VP Nandakumar, Managing Director and CEO of Manappuram Finance said the size of the TLRTO may have to be increased going forward.

Published on April 17, 2020

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