The Finance Industry Development Council (FIDC), the umbrella body for non-banking financial companies (NBFCs), has written to finance minister Nirmala Sitharaman, seeking a waiver on the extra 10% provisioning requirement for the one-time restructuring of loans. The Reserve Bank of India (RBI) had earlier mandated banks and NBFCs to provide 10% more capital for the restructuring of loan accounts impacted using Covid-19. The regulator on August 6 had allowed restructuring of personal and corporate loans with strict barriers.
The letter noted that NBFCs observe Indian accounting standard (IND AS) norms on provisioning for credit losses. “Those provisions are a whole lot higher than RBI norms,” FIDC stated. “IndAS norms require provisioning to be finished for credit losses on historical average and personal experience of respective lenders and therefore, all accounts are correctly provided for,” it added.
The letter similarly stated, “We, therefore, suggest that the extra provisioning requirement may be dropped for restructured accounts for NBFCs.” FIDC additionally asked finance minister Nirmala Sitharaman for extending one-time restructuring to all standard accounts. Presently, the central bank allows only one’s accounts to be eligible for restructuring, which does not have dues for more than 30 days as on March 1. The NBFC frame has requested the finance minister that accounts which have dues until 90 as on March 1, 2020, to be included for one-time restructuring. An account stays standard till 90 days of a default by using borrower, earlier than it is classified as a non-performing asset (NPA) by using lenders.
The Banks and NBFCs had in advance met finance minister Nirmala Sitharaman on September 3 to discuss one-time loan restructuring. The finance minister asked lenders to have a board-approved restructuring policy for his or her harassed customers using September 10. Nirmala Sitharaman additionally asked banks and NBFCs to commence the process of assessing and if needed, restructuring loans of eligible customers through September 15.
The industry body said a large number of small and medium-sized NBFCs aren’t equipped up to issue bonds and are not able to utilize the benefits of the PCG 2.0 window. The scheme can also be extended for term loan facilities granted to the NBFCs but restricted to quit the use of funds for lending to micro and small enterprises.
