NBFCs Seek Moratorium On EMIs For At Least 3 Months

The Finance Industry Development Council (FIDC) has requested the Reserve Bank of India and the Government to announce a moratorium on EMI (equated monthly instalment) payment for at least a three months; allow restructuring of accounts that may become delinquent; and extend the period for recognition of non-performing assets (NPAs) from the current three months to six months past the due date.

FIDC, which is the representative body of assets and loan financing NBFCs, reasoned that the Covid-19 pandemic is expected to have a significant and perhaps a long-term impact on the Indian economy, especially the MSME, auto, transportation and trading segments.

“Non-banking finance companies (NBFCs) are at the forefront of financing many of the affected sectors, notably small road transport operators, taxi aggregators, infrastructure contractors, MSMEs, traders, etc., and the current situation is likely to result in delayed payment of EMIs even by customers with a hitherto excellent and unblemished repayment history,” FIDC said.

This may affect their credit scores for no fault of theirs, seriously impairing their ability to raise finance in the future for business, it added.

The Council said the pandemic may impact supply chains, hospitality and infrastructure contracting segments as well deeply. In fact, early market reports suggest increase in stress levels in the economy, it added.

Specifically, FIDC wants the RBI and the Government to announce a moratorium on payment of EMIs for at least three months by deferring at least three EMIs. This would ensure that unintended defaults do not affect credit track record and bureau scores of customers.

The Council wants one-time restructuring of all regular accounts that are today not in default, but those that may become delinquent in the future without the extant requirement of 5 per cent provisioning in the NBFCs’ books.

FIDC also wants the period for recognition of NPAs extended from the current three months to six months past due in cases that are non-delinquent as on March 1, 2020.

Any provision made on loans that are already NPA should not be allowed to be written back to ensure maintenance of the sanctity of recognition of prior NPAs, it added.