By Ankur Mishra

Public sector lender Bank of India has decided to provide a moratorium to non-banking financial companies (NBFCs), among others, according to a notice put out by the bank on its website. “All commercial banks, co-operative banks, all-India financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) are covered under moratorium,” the notice said.

Reserve Bank of India (RBI) governor Shaktikanta Das on March 27 permitted lending institutions to defer instalments of term loans by three months from March 1, 2020. However, many banks did not pass on the benefit of moratorium to NBFCs. The sector faced double whammy as NBFCs followed RBI’s instruction on deferring instalments to borrowers, but they did not get the same relief from the banks.

According to sources, the RBI has conveyed to banks that there is no restriction for them to provide moratorium to NBFCs. The regulator has left it to individual bank for taking decision on providing moratorium to NBFCs. This clarity was given by the banking regulator, after Indian Banks’ Association (IBA) had reached out to RBI on the matter. In the last meeting of IBA held on April 18, no consensus emerged on granting moratorium to NBFCs. While Bank of India, Bank of Baroda and Indian Bank were in favour of giving moratorium relief to NBFCs, State Bank of India (SBI) had continued to maintain the stance of not providing moratorium, as per sources.

Jignesh Shial, an analyst at Emkay Global, said, “I see no reason why banks were refusing to grant moratorium to NBFCs.” According to a rough estimate, NBFCs have to repay around Rs 2 lakh crore from March till June 2020, but the RBI has only provided Rs 50,000 crore in the form of targeted long term repo operations (TLTRO), he further added.

According to Krishnan Sitaraman, senior director, Crisil Ratings, majority of NBFCs may not face liquidity issue. ”Even though we assume there will not be any collection for NBFCs till June end, only 23% of NBFCs falls short of the liquidity cover,” Sitaraman added.