The Indian Banks Association meet this afternoon to consider providing the moratorium relief to non-banking financial companies (NBFCs), CNBC-TV18 learns from multiple sources.
Heads of several public sector banks, including State Bank of India, Union Bank of India, Bank of India, Central Bank of India and others, as well as private sector banks like Axis Bank, and IDFC First Bank among others will be part of today’s meeting, sources said.
The key agenda for the meeting is to discuss the measures to support NBFCs, who have been left out of the March 27 moratorium benefit announced by the Reserve Bank of India. While NBFCs are permitted to give the three-month moratorium/deferment benefit to their borrowers, they have to continue repaying their lender-banks and others.
Finance Industry Development Council or FIDC, a self-regulated body representing the NBFCs in India, wrote to Sunil Mehta, Chief Executive of the IBA, ahead of the April 18 meeting.
In the letter reviewed by CNBC-TV18, FIDC has sought that banks allow moratorium on payment of interest and principal due from those NBFC/housing finance companies between March and May, 2020, and also actively provide liquidity support under Targeted Long Term Repo Operations (TLTRO) and various schemes like term loans for on-lending to priority sectors, as has been permitted by the RBI.
CNBC-TV18 had reported on April 16 that State Bank of India, the country’s largest lender, favoured supporting NBFCs through small loans of upto Rs 200 crores, rather than providing them the benefit of moratorium.
“You either trust NBFCs, or you don’t. Why give loans if you don’t trust them with moratorium, or why bother investing in their instruments when you’d rather not take any exposure to the weaker NBFCs?” the head of a large bank told CNBC-TV18.
He added that the banks need to collectively decide if they will or will not provide support to the smaller NBFCs, before they decide on the kind of support to offer via TLTRO, loans or moratorium relief.
The Reserve Bank yesterday announced a Rs 50,000 crore liquidity lifeline for NBFCs through a second round of TLTRO, with half of the total fund reserved for small and mid-sized NBFCs and microfinance institutions.
Another banking executive remarked that it was not the lack of liquidity that was stopping banks from lending to NBFCs, but their risk aversion due to the large pile up of bad loans.
First Published: IST