Why SBI is having a rethink on granting moratorium on loans to NBFCs
The country’s largest lender State Bank of India will take up the issue of granting moratorium the non-banking financial companies (NBFCs) in its board meeting today, said people aware of the matter.
So far, SBI was not in favour of a blanket moratorium relief to any NBFC, and took a stance that it would instead support the industry via loans or investments in their bonds, CNBC-TV18 had earlier reported.
“Giving a 3-month moratorium is not going to benefit these NBFCs...Here is a case where post-IL&FS crisis, NBFCs have started taking term loans for three years, and managing their ALM book better... only issue is that there are some NBFCs have raised money through commercial papers (subscribed by MFs and others) and there is a challenge of roll-overs,” explained a person familiar with the bank’s call to not grant moratorium to NBFCs.
“If some maturities are coming up in these three months, and if those are creditworthy, we will definitely roll over the loan,” another executive at the bank said, adding that the bank has so far received requests from as many as 25 NBFCs for support via additional loans or investments in their bonds, which SBI is considering.
While this was the primary concern because of which SBI took the stance against the relief, it is also worried about the repayment capacity of some of the smaller NBFCs which are under stress, among other reasons.
Over the weekend, in a meeting with bank chiefs, the Reserve Bank of India made its stance very clear - that banks would have to take the call on extending this relief on a case to case basis, as per their own board approved policies. While the banking industry remains divided on the issue, RBI has effectively put the ball bank in the banks’ court, and told them that the regulator will not prescribe rules for how banks take these commercial decisions.
Add to this, the pressure to allow moratorium for NBFCs has been mounting on SBI, especially with some large lenders opining that it simply would not work if only a few banks grant moratorium to an NBFC and others do not.
Following an Indian Banks Association meeting on the issue, the head of a large Mumbai-based public sector bank had told CNBC-TV18, “We cannot have some banks granting moratorium to an NBFC, and other banks in the consortium not granting relief, that will not work out. So we need to have a consensus in the action we will take as an industry.”
So SBI will examine the issue in its board meeting today, to see if there is a case for allowing the benefit to NBFCs, even on a case to case basis.
In the absence of any prescription from the regulator, the other banks are likely to take their cue from State Bank of India, and what it finally decides to do.
First Published: May 6, 2020 11:28 AM IST
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