NBFCs securitised loans, so 1 crore retail borrowers may miss moratorium

By: |
April 11, 2020 6:10 AM

These investors are yet to approve the moratorium on underlying loans and reschedule most PTC repayments because they don’t have clarity on the impact such a move will have on the valuation of their investments.

As per extant rules, any rescheduling will force reclassification of the investments as ‘restructured’. As per extant rules, any rescheduling will force reclassification of the investments as ‘restructured’.

Over one crore retail borrowers eligible for the RBI’s three-month moratorium on loan repayments have not been able to benefit from it yet. That’s because NBFCs which gave the loans have already securitised them — pooled future receivables or repayments into pass-through-certificates and sold them to investors such as banks, NBFCs, MF, insurers and HNIs.

These investors are yet to approve the moratorium on underlying loans and reschedule most PTC repayments because they don’t have clarity on the impact such a move will have on the valuation of their investments. As per extant rules, any rescheduling will force reclassification of the investments as ‘restructured’. That would raise provisioning requirements and cost, and impact marked-to-market (MTM) valuations.

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