are offering fresh credit at rates above 8 per cent depending on the tenor, while borrowing funds from the RBI at 4.4 per cent.
and HFCs have to give a three-month moratorium to their consumers on term loans, as suggested by the RBI last month. But majority of the
and HFCs that are availing credit like any other borrower.
Moratorium becomes crucial for NBFCs and HFCs as disbursements and collections will take a hit because of the coronavirus
pandemic, resulting in cash flow problems.
Senior executives with NBFCs and experts have warned that the sector may face another bout of liquidity challenge if there is no clarity on the moratorium. The lenders had faced a severe liquidity crunch after defaults by IL&FS Group in 2018.
Bankers said they have taken up the issue with the RBI through industry body Indian Bank’s Association and are soon expecting a clarification.
“We are still not sure and we are waiting for a clarification either from the RBI or from SBI,” said a public sector banker.
“We feel the RBI circular is fairly clear and it doesn’t exclude NBFCs from being a beneficiary of the moratorium, but a few banks, such as SBI, have some reservations on it, so we are waiting for the RBI to clarify. We will definitely have some clarity soon.”
Rating agency CRISIL said the analysis of the entities it rates suggests that liquidity pressure will increase for nearly a quarter of them if collections do not pick up by June this year. These NBFCs have Rs 1.75 trillion of debt obligations maturing by then.
With collections at a low and the moratorium only for their borrowers, raising funds is critical for NBFCs, especially because these lenders, unlike banks, do not have access to systemic sources of liquidity and depend significantly on wholesale funding.
Bank borrowing is a major source of funding for the shadow banking sector, especially the smaller ones. Apart from that, they borrow money from the debt capital markets via instruments like NCDs and CPs. Of late, many have been borrowing overseas through ECBs, given the liquidity challenges they were encountering in the domestic market.
Raman Aggarwal, co-chairman, Finance
Industry Development Council, said “We had communicated the concerns to the RBI and have been given assurance that the matter is being looked into.”
The CEO of a large HFC said: “There are differences between banks on this issue. Some banks are willing to provide moratorium while some others do not want to. The impact on the sector will vary among NBFCs depending upon their liquidity position.”