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Tuesday, June 02, 2020

SBI, other banks agree to extend moratorium to NBFCs, MFIs

SBI and other banks will offer the moratorium on loan repayment to NBFCs which have taken loans from them, banking sources said.

By: ENS Economic Bureau | Mumbai | Published: May 7, 2020 1:55:46 am
nbfc, bank moratorium, nbfc nbfcs liquidity crisis, nbfc loans, rbi, india economy Lenders had earlier refused to provide the moratorium even though NBFCs had extended the facility to their customers following the RBI’s relaxation on repayment schedules. (File Photo)

After initial hesitation, banks — led by State Bank of India (SBI) — have finally agreed to extend the three-month moratorium to troubled non-banking financial companies (NBFCs) and micro-finance institutions (MFIs). SBI and other banks will offer the moratorium on loan repayment to NBFCs which have taken loans from them, banking sources said.

Lenders had earlier refused to provide the moratorium even though NBFCs had extended the facility to their customers following the RBI’s relaxation on repayment schedules. “SBI has agreed to consider moratorium on a case-to-case basis. Other banks have also showed their willingness to consider the moratorium,” said a financial sector source. NBFCs also took up the loan moratorium issue with senior Reserve Bank of India (RBI) officials recently,

On March 27, the central bank, in its first COVID package, had slashed the repo rate by 75 basis points (bps) to 4.40 per cent, cash reserve ratio (CRR) by 100 bps to 3 per cent and announced a three-month moratorium on term loans to support the economy. The moratorium is applicable on payment of instalments with respect to all term loans and credit card dues outstanding as on March 1 and up to May 31.

Subsequently, banks got cold feet over extending the moratorium to NBFCs and MFIs. Banks largely ignored the Rs 25,000-crore long term repo operations (TLTRO) conducted by the RBI and bid for only half of the money put by the central bank last month, indicating their unwillingness to bail out troubled NBFCs and MFIs.

There’s already a complaint that banks which had taken funds from the TLTRO window offered by the RBI earlier had given that money to top-rated corporates, ignoring the claims of cash-starved small and medium units.

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