Micro-finance Players In Talks With RBI, Government For Moratorium, Liquidity Support

Concerned about their cashflows in the current period of lockdown, micro-finance companies are in talks with the government and Reserve Bank of India to include them in the three-month moratorium and also to provide a special liquidity fund.

“We are in discussions with RBI to extend the moratorium to micro-finance companies as well,” said Harsh Shrivastava, CEO, Microfinance Institutions Network, adding that they are also in talks with the government on a fund to give liquidity to all NBFCs.

“The government is in talks with us also on how many MFIs will be eligible (for the fund), what their credit is rating,” he told BusinessLine.

At present, banks and institutions like SIDBI are not extending the moratorium to MFIs and NBFCs for their borrowings.

“The RBI has to clearly say that MFIs are eligible. It does not have to mean a blanket extension, it will have to be on a case-to-case basis,” Shrivastava said.

Collections by MFIs have come to a standstill under the current lockdown and they are hoping to gradually normalise operations from May, depending on how the lockdown is lifted after April 30.

“The critical challenge is for banks to give moratorium to MFIs, especially smaller and medium companies that do not have so much liquidity,” Shrivastava said, pointing out that these companies will find it difficult to repay the loan and lend to their customers without the moratorium.

Borrowers of MFIs are eligible for the three-month moratorium given by the RBI for all standard accounts as on March 1, 2020.

“Once the lockdown is lifted, some of the borrowers who have paid off most of their loans and may need more money to expand their business, will be hungry for some financial support,” he said, adding that MFIs will also need money for their own operations including payment of salaries and rent.

Meanwhile, MFIs are also hoping that they will be allowed to resume operations once the lockdown is lifted in phases.

“As MFIs are also in financial services, we are thinking of asking (them) to resume operations, at least with skeletal staff,” Shrivastava said.

The government is already considering allowing some industries to restart functioning on a gradual basis.