Allow debt recast for borrowers of NBFCs: FIDC to RBI

The Finance Industry Development Council (FIDC) has recently written to RBI seeking restructuring of stressed retail and individual borrowers of non-banking finance companies, irrespective of whether these loans have been restructured earlier. In a letter written to the RBI Governor Shaktikanta Das, the industry body also requested loan recast for smaller NBFCs, having asset size of less than Rs 500 crore.

“Considering the severe second wave of COVID-19, the retail borrowers, including the MSMEs, as also the retail and wholesale trader industry shall be in urgent need of support from the lenders, to revive their economic activities,” FIDC stated requesting extension of the restructuring scheme till March 31, 2022.

It said the borrower accounts, irrespective of whether or not such accounts had been ‘restructured’ on any earlier occasion and which are ‘standard’ accounts as on March 31, 2021, may be allowed ‘restructuring’ without any downgrade in asset classification. However, this will be subject to the lending NBFCs undertaking fresh credit assessment of the borrowing entity, it added.

The industry body urged RBI to allow standstill on buckets for restructured accounts for the first quarter of FY22. The letter further stated the only mode of borrowings for the smaller NBFCs (having asset size of less than Rs. 500 crore) is to raise term loans from banks, financial institutions like SIDBI, Nabsamruddhi and Nabkisan and large NBFCs. These smaller players do not have access to the capital markets and they do not issue bonds.

“We therefore submit that these small NBFCs may be given the benefit of getting their loans restructured (one-time) from banks and financial institutions (FIs),” FIDC added.