Banks are split in offering moratorium to NBFCs

The banking industry is split in the middle in offering moratorium on payments to the Non – Banking Finance Companies with one group extending the regulator blessed facility, while the other dragging its feet on whether to do so or not, said industry participants.

Some private and foreign banks have come forward to give forbearance on repayments till May 31, but the state-run banks haven’t moved so far, and even those which did so are rowing back on the granted moratorium, said people who did not want to be identified for fear of reprisal.

Banks’ hesitation appears to be following the State Bank of India’s decision not to grant or keep the NBFC segment out of the moratorium, said the bankers.

Some private and foreign lenders including Kotak, IndusInd, ICICI, Standard Chartered are said to have granted moratorium to select shadow banks. Those non-government lenders mostly extended moratorium for principal replacement. Those lenders didn’t immediately reply to ET’s mailed queries. “We continue to support our clients during these unprecedented times,” said a spokesperson from Standard Chartered Bank

“We have received moratorium on principal repayments from select private sector and foreign banks,” said the chief of an NBFC who did not want to be identified. “We are now paying only the interest on credit we availed from them.”

The Reserve Bank of India on May. 27 declared that banks can grant moratorium on payments falling between March. 1, and May. 31, as the economy grounded to a halt due to the lockdown to counter Coronavirus. While the regulator did not specifically mention any segment, it left to the banks’ discretion on which borrower to grant moratorium.

While it is clear that any borrower with difficulties could avail of moratorium facility, State Bank of India has specifically barred NBFCs from the benefits.

Rating company Crisil said many companies are staring at defaults in the absence of a moratorium to NBFCs. It estimates about Rs. 1.75 lakh crores of debt maturing by June.

“We and many other banks think that NBFCs should be given a moratorium since a majority of their funding is linked to banks and it is not fair on them when their customers are not paying back,’’ said a CEO of state-run bank who did not want to be identified.

“However, since SBI has not agreed nobody has gone ahead. SBI with 25% of the market is a large influence on the system and we need clarity from them. RBI norms are very clear and hence they will not issue any clarification. It all depends on what call SBI takes.”

Driven by the confusion, NBFCs as an industry, has sought regulatory intervention so that banks provide them the relief. So are the banks.

“We have written to the RBI seeking clarity on this particular set of borrowers. Otherwise customers have to send an email, letter or SMS asking to stop their debit mandates for these months,” said an executive director of a public sector bank.

Some banks are suggesting that NBFCs could use the bonds route to repay. They say they are eager to lend the money banks are raising through the Targeted Long Term Repo Operations (TLTRO). Under this facility the RBI would provide up to Rs. 1 lakh crores to banks at the repo rate of 4.4 percent which banks have to mandatorily on lend. Of this half of it has to be invested in primary bond issues.

But at the same time, some of the NBFCs are comfortable with liquidity that could see them through this crisis even if there is no moratorium.

“We are good to go for three months,” said Sanjaya Gupta, managing director at PNB Housing Finance, while about 45% of its retail borrowers and 70% developers are seeking to defer their installment payment following RBI’s move.

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