Most public sector banks are likely to follow suit as they are also yet to give the three-month breather to non-banking finance companies on repayment of term loans as per the Reserve Bank of India's circular dated Mar 27. Banks, especially public sector lenders, prefer credit support, through credit lines and funds raised through RBI’s targeted long-term repos, instead giving the relief on repayment.
"The bank is of the view the three-month moratorium is not advisable for NBFCs because it is only temporary in nature. The exposure to over 100 NBFCs is being assessed to study which one will require immediate funds because the cash flow and liquidity is impacted," said a senior official of SBI.
SBI may give new credit in the range of 0.5-2.0 bln rupees depending on the nature of business and cash flow mismatch. The tenure of the loan may vary from each NBFC, the official added. Latest data on the RBI shows that banks' loans to NBFCs stood at over 7 trln rupees as on Feb 28, up 22.3% year-on-year. SBI's new credit line is likely to be similar to the COVID-19 Emergency Credit Line it had opened for companies. This facility is in the form of 12-month demand loan at a fixed interest of 7.25%.
Borrowers can avail an amount of up to 10% of their existing fund-based working capital limits with an upper limit of 2 bln rupees. NBFCs had sought the central bank's intervention in getting a leeway from the commercial banks on loan repayment. As NBFCs cater to small-time borrowers such as truck drivers, and owners of micro business units, they were readily providing moratorium because such borrowers have been hit the worst by the lockdown, according to officials with non-banking lenders. But on other hand, they are not able to avail of leeway on repayment of bank loans. This is particularly impacting small and medium-sized NBFCs who mainly rely on banks, analysts said. Lower collection of loans has already impacted some NBFCs. NBFCs, however, said that banks were refusing the moratorium citing liquidity provision that is being made available for NBFCs by the RBI.
The RBI is conducting "targeted" term repos of three-year tenures for up to 1 trln rupees in tranches to provide liquidity to banks to be used for buying commercial paper and corporate bond markets. Already, 75% of this amount has been auctioned. However, hardly any amount has flown to NBFCs and it has instead gone to big corporate and public sector undertakings, according to non-bank lenders. This also prompted RBI on Thursday to tighten rules on end use of funds. Now, the maximum amount a particular bank can invest in the securities issued by a particular entity or group of entities out of the allotment received by it under the targeted long term repo operations will be capped at 10%. Another auction of 250 bln rupees is scheduled to be conducted on Friday.