The Finance Industry Development Council (FIDC), a representative body of non-banking finance companies, on Monday urged Finance Minister Nirmala Sitharaman to drop additional provisioning requirements for NBFCs on accounts restructured under the one-time loan restructuring scheme.
In August, the Reserve Bank of India (RBI) allowed one-time restructuring of corporate and personal loans due to the COVID-19 pandemic. Under the scheme, lending institutions have to make an additional provisioning of 10 per cent for accounts where restructuring plans are implemented.
In a letter to the finance minister, FIDC also said non-banking financial companies (NBFCs) have been mandated to follow Indian Accounting Standard (IND-AS) norms on provisioning for credit losses and these provisions are much higher than the RBI norms.
"IND-AS norms require provisioning to be done for credit losses on historical average and own experience of respective lenders and, therefore, all accounts are adequately provided for. We suggest that the additional provisioning requirement may be dropped for restructured accounts for NBFCs," FIDC said in the letter.
Last week, Sitharaman held a review meeting with the heads of banks and NBFCs on the one-time debt recast scheme.
The minister had asked banks and NBFCs to roll out loan restructuring schemes for COVID-19-related stress by September 15 and provide adequate support to the borrowers following the lifting of moratorium on repayment of debts.
She also urged lenders to immediately put in place a board-approved policy for resolution of stress loans.
Under the debt recast framework, only those borrower accounts shall be eligible for resolution that were classified as standard, but not in default for more than 30 days with the lending institution as on March 1, 2020.
FIDC has requested to include under the scheme all the standard accounts in the 0-90 day bucket.
"Given that the micro and small enterprises have uneven cash flows and even prior to COVID-19, were having viability issues, we seek your consideration of this scheme for all the standard accounts in the 0-90 day bucket so that the wider spectrum of customers can benefit from it," the industry body said.
FIDC further said that currently, the loans given for passenger vehicles and tractors, both used in the business and/or commercial applications, are excluded from the coverage of the Emergency Credit Line Guarantee Scheme (ECLGS).
"We request inclusion of passenger vehicles to self-employed customers and tractors to small and marginal farmers within the ambit of the scheme," it said.
The current ECLGS scheme mandates 1+3 years of repayment in which the customer will pay interest for the first year and then repayment of loan is done in the next three years.
"Our existing loan size is very small and at times, the customer may not want 1+3 years but a lesser period of repayment. We request flexibility in fixing the tenure but not exceeding 1+3 years based on the customer's desire and cash flows," it said.
FIDC has asked to increase the tenure of guarantee under the Partial Credit Guarantee Scheme 2.0 to 36 months from 18 months which would encourage banks to lend to NBFCs for 36 months.
The industry body said a large number of small and medium-sized NBFCs are not equipped to issue bonds and are unable to utilise the benefits of PCG 2.0 window.
"The scheme can also be extended for term loan facilities granted to the NBFCs but limited to end use of funds for lending to micro and small enterprises," it suggested.
