With the prevailing cash crunch not looking like stabilising any time soon, the asset-financing NBFCs have knocked on RBI’s door to further extend the 60-day grace period granted to them for recognition of delinquent and non-performing loans.
The Finance Industry Development Council (FIDC), representative body of asset-financing NBFCs, has written to the RBI requesting that the 60-day grace period be extended till the conclusion of the current financial year.
Simply put, the classification of a borrower as on November 1, 2016 should be kept at the same status till April 1, 2017, the FIDC has submitted.
“This would prevent creation of undue stress in the system, and that too for reasons beyond the control of both the lenders and the borrowers,” said Raman Aggarwal, Chairman, FIDC.
“It would go a long way in improving the confidence levels of not just banks and NBFCs, but also ensure that the credit record of small and medium borrowers, transport operators, small contractors and farmers are not impacted due to demonetisation and that they are able to avail themelves of credit facilities in the long term,” he said. In its letter, FIDC has taken a view that it may take another 2-3 months for things to settle down. Majority of the research studies undertaken to assess the ground level situation point to a significant slowdown in business, especially in sectors such as real estate and housing, small and medium businesses, transport operators, contractors and automobiles, according to FIDC.
The automobile sales figures released by Society of Indian Automobile Manufacturers (SIAM) for the month of November clearly reflects this scenario. “It would be in our opinion, fair to suggest that the disruption may last at least, till the conclusion of the current financial year,” said the FIDC letter.
It may be recalled that the NBFCs had — post the November 8 demonetisation announcement —requested RBI that NBFCs should also be allowed to accept old notes of Rs. 500 and Rs. 1000 denomination, towards loan repayments (only), as lot of borrowers (from NBFC) wanted to repay in cash using the old notes. But the demand was not accepted by the central bank.
Now, the borrowers’ business has been affected with no money circulation. Because of the very nature of their trade and credit behaviour, if the available cash is not collected from borrowers, it is most likely to roll forward to the next month, making it more difficult for them to repay. “This may lead to loan defaults thereby adding stress to the overall assets.
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