FIDC to RBI: Allow NBFCs to restructure loans

Mumbai The Finance Industry Development Council (FIDC) has written to the Reserve Bank of India (RBI) seeking permission to restructure loans given by NBFCs in the wake of the deep Covid crisis. The NBFC body, in its letter to the RBI Governor, said that the borrower accounts, which are 'standard' accounts as on March 31, 2021, may be allowed restructuring without any downgrade in asset classification, subject , however to the lending NBFCs undertaking fresh credit assessment of the borrowing entity.

It requested the RBI to consider advising banks and financial institutions to allow one-time restructuring of loans given by them to small NBFCs only (NBFCs with total asset size of less than Rs 500 crore).

The FIDC further urged the Central bank to increase the overall support outlay to AIFIs from Rs 50,000 crore to at least Rs 75,000 crore.

"While the existing allocation for other sectors may continue at their prescribed limits, the additional Rs 25,000 crore may be made available exclusively to medium and small NBFCs, through SIDBI, for period of three years," it said.

Sonam Chandwani, Managing Partner at KS Legal and Associates said that in the midst of the second wave of Covid-19, the NBFCs are more likely to be knocked back than before, therefore, permission for loan restructuring and liquidity support from the RBI would offload immense pressure off small and medium-sized NBFCs.

"Moreover, considering the fact that NBFCs are highly risk averse, flow of liquidity would undoubtedly enable consumers and small firms to heave a sigh of relief. Also, though the lockdown has witnessed saving of only a minimal class of the population, cash flow crunch is still evident, thereby permitting loan restructuring could avoid coercive recovery measures," she said.