PNB, India Infoline offer top-up loans, but without moratorium

Mumbai: At a time when several banks and most shadow lenders are conserving cash, India Infoline and public sector banks such as Punjab National Bank (PNB) are offering top-up loans to their existing customers. Caveat emptor: They must not avail of the three-month repayment moratorium.

Although counter-intuitive at first glance, the offers make sound business sense. Not only will such loans offer the opportunity to expand loan books in these lean times, the pre-condition will also help prevent or delay delinquencies and non-performing assets (NPAs) on accounts that were standard before the lockdown began.

In a sense, therefore, these are akin to a shadow stimulus, helping business borrowers meet their immediate working capital needs. Queries sent to PNB and Bank of Baroda remained unanswered.

“We are only offering these loans to the borrowers with no overdues and have average seasoning with us of 24 months with the current credit score above acceptable norms. And we have a collateral on the loans,” said Monu Ratra, CEO of IIFL Home Finance. “We have sufficient liquidity with us and the customers seeking such loans are the ones who may have emergency needs.” The document it shared with prospective customers said the offers will require “the borrower(s)’s consent for the waiver of the three- month moratorium.”

PNB, India Infoline Offer Top-up Loans, But Without Moratorium

The RBI has let financiers grant a moratorium to accounts in default but standard (non-payment in 30 to 90 days bucket). In such cases, the lender will have to make provision of at least 10% spread over March and June quarters, with not less than 5% in each quarter.

The move, of course, has its share of critics. “Why will a borrower prefer a top-up loan and not opt for a moratorium? In both cases, he will have to pay similar interest. Although we do top-up loans in the home loans segment, we are not making any offers with the condition to opt out of moratorium,” said a senior executive at a leading bank. Auditors reportedly want the lenders to provide for more than 10%, depending on the quality of asset.

“But NBFCs and HFCs that fall under Ind-AS may have to provide for more in line with the model chosen by them — Stage 1, Stage 2 and Stage 3 — up to the satisfaction of the statutory auditor,” said Atanu Bagchi, ex-CFO of Can Fin Homes.

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