Covid-19 relief: Lenders want SBI to include NBFCs under moratorium

MUMBAI: Several lenders are trying to convince the trade big daddy State Bank of India (SBI) to cover non-banking finance companies (NBFCs) under the moratorium announced by the regulator as part of the COVID-19 relief package.

The moratorium allows deferral of loan interest servicing and repayment for three months. The Reserve Bank of India (RBI) notification and the subsequent FAQ from the industry lobby IBA does not specifically exclude NBFCs from the moratorium. However, an internal SBI circular says that currently financial intermediaries, NBFCs, housing finance companies and micro-finance institutions will not be covered, a senior banker told ET.

In the past few days, large banks, including some of the state-owned as well as private sector lenders, have reached out to SBI to put across the point that in the absence of a moratorium some of the small and medium NBFCs could run into serious cash-flow problem.

Responding to ET’s query on the subject, SBI chairman Rajnish Kumar said, “This is for the RBI to clarify.”

According to banking circles, it’s possible that SBI’s stance is based on discussions with the central bank and the ministry. “The LTRO announced by RBI covers a large part of the installments of NBFCs due over next three months… if the banks give such a facility to non-bank lenders their own liquidity could come under pressure,” said a government official. (The long-term repo auction (LTRO) is long term loan that RBI gives to banks at the policy repo rate)

However, given the state of the money market and the wide risk-aversion, bankers fear that only top-notch would be in a position to raise funds and rollover their liabilities.

The banking industry’s loan outstanding to NBFCs is about Rs 12 lakh crore (about 12 % of the total loans). “A large part lies in the books of SBI. It will not make sense to extend the moratorium to NBFCs without SBI’s participation.. we have been in touch with SBI. We are waiting for SBI’s response,” said the chairman of a large public sector bank.

Besides bank loans, NBFCs’ sources of funds are capital market instruments like non-convertible debentures (NCDs) and more recently external commercial borrowings. “There is no moratorium on traded securities NCDs while offshore lenders extending ECBs are unwilling to give any relief. If they have no collections from loans, some of them will need special liquidity lines..This facility was offered during the 2008-09 financial crisis though it was never used,” said a banker.

According to a PTI story dated 4th April, industry body Ficci has requested the government to open a special liquidity line to NBFCs from banks as well as allot a sizeable part from the RBI’s

LTRO auction amounts to the sector which lends to MSMEs, infrastructure and real estate sectors that have been severely impacted by Covid-19 outbreak.