Non-banks to apply for benefit; Crisil-rated NBFCs owe ₹1.75 lakh crore, MFIs ₹18,500 crore

In a move that could give a huge relief to the non-banking finance companies (NBFCs) facing a cash crunch, the State Bank of India (SBI) has decided to extend loan moratorium to these entities.

According to top sources in the bank, the decision was taken after a meeting on Wednesday, wherein it was decided that non-banks that wanted to avail the three-month moratorium on payment of instalments will have to apply for the same and the facility will not be extended by default.

The move comes days after a recent meeting between the Reserve Bank of India (RBI) and commercial banks wherein the issues of moratorium and liquidity flow to NBFCs were discussed.

Assess cash flow

The SBI will assesss the cash flow situation of the NBFCs before deciding on extending the facility. If an entity had a negative cash flow, that is, if repayments or inflows to the NBFC were lower than the outflow, only then the facility would be extended.

At end March, following the nationwide lockdown, the RBI had allowed banks to extend three-month repayment moratorium to their term loan customers without classifying them as non-performing assets.

Lenders’ reluctance

While the banks had extended the facility to the retail borrowers, they were reluctant to extend the same to the NBFCs, including housing finance companies and micro-finance institutions.

Bank funding is a key source of liquidity for the NBFCs.

As a result, NBFCs that had extended the benefit to their customers but were not granted one from the banks were facing a severe liquidity crunch.

Rating agency Crisil had said that the NBFCs rated by the agency would face a ₹1.75 lakh-crore debt obligation maturing by June end.

Similarly, micro-finance institutions had informed the RBI during a recent meeting that they had to repay a debt of ₹18,500 crore in the next three months.

Sa-Dhan, the industry body of micro lenders, had urged that the moratorium be extended until June 30, as March payments were mostly done by customers.

With SBI now deciding to offer the moratorium, NBFCs expect other commercial banks also to follow suit.

“Since the SBI had decided to extend the moratorium, we expect other banks also to extend the same benefit to the NBFCs,” said the MD & CEO of a housing finance company.