Maharashtra lockdown: NBFCs write to state govt, seek partial opening to continue services

An industry body representing non-banking financial companies (NBFCs), has written to the Maharashtra government seeking permission to function partially, after the state announced stricter curbs to contain the spread of the novel coronavirus.

The Finance Industry Development Council (FIDC) has raised concerns about the only segment of the financial sector that has not been allowed to function amid the new 'Break The Chain' lockdown guidelines issued by the Maharashtra government, which comes into effect from April 5.

The state has exempted banks, insurance companies, stock markets and mutual funds from shutting offices during the month-long lockdown, but not NBFCs.

"In this difficult phase, there is a great challenge in balancing interest of our various stakeholders, primarily the employees, deposit holders, debenture holders, banks and institutions, such that NBFCs continue to meet their commitments for timely payment of interests, maturity payments of fixed deposit holders, debenture holders. A large number of the deposit holders and debenture holders are senior citizens who depend on the interest on fixed deposit and debentures paid on monthly or quarterly basis. Any delay in servicing them will upset their livelihood," the FIDC said in a note addressed to Chief Secretary of the Government of Maharashtra, Sitaram Kunte.

NBFCs have urged the government to allow them to function with at least 30 percent staff on a rotational basis.

"NBFC customers are primarily small truck or commercial or passenger vehicle operators, small 3-wheeler operators, farmers, and MSMEs who visit our branches for making payment of EMIs of their loans. We have made great progress over last few years in moving our customers to digital payments mode and that effort would continue," the letter noted.

"If at least 30 percent of our staff are permitted to be operative on rotation basis, we can cater to the rising financial requirements of a larger segment of lower and middle income customers during this challenging time," said FIDC.

NBFCs said that a similar exemption was extended during the national lockdown imposed in 2020 by Ministry of Home Affairs.

A report by rating and research agency CRISIL in February said that stressed assets of non-banking financial companies (NBFCs) are expected to reach Rs 1.5 to Rs 1.8 lakh crore, or 6.0 to 7.5 percent of the assets under management (AUM), by March 31, 2021.

Krishnan Sitaraman, Senior Director, CRISIL Ratings had said in the February report, "This fiscal (FY21) has brought unprecedented challenges to the fore for NBFCs. Collection efficiencies, after deteriorating sharply, have now improved, but are still not at pre-pandemic levels. There is a marked increase in overdues across certain segments and players."

Even before their collection efficiency reaches pre-pandemic levels, the fresh lockdown in Maharashtra may worsen their situation, hit operations further. The exact share of the state of Maharashtra in the overall business for NBFCs could not be immediately ascertained, but industry executives said it contributes a 'significant' portion.