NBFC body writes to RBI seeking to bring MSMEs under loan relief plan
Non-banking finance companies (NBFCs) have asked the Reserve Bank of India to extend the relief on working capital limits announced earlier this month to MSMEs as well.
The RBI had announced a series of measures to help individual borrowers, small businesses and MSMEs to tide over the second wave of Covid-19. As part of these steps, the RBI had said that banks can recast the accounts of individual borrowers and small businesses who had restructured their loans under last year’s resolution framework.
In such cases, banks have been permitted to modify these plans and they can increase the period of moratorium or extend the residual tenor up to a total of two years.
According to the Finance Industry Development Council (FIDC), a body which represents NBFCs, the RBI’s circular is silent on whether such a relief will also apply to MSMEs.
“We observe that this notification has not given the desired relief for extending the residual tenors for the MSME customers whose contracts have been restructured under Resolution Framework 1.0 as provided to individuals and small businesses,’’ the FIDC said in a letter to RBI governor Shaktikanta Das.
The industry body said that the second wave of Covid-19 has created new uncertainties in the country’s economic revival and MSMEs are the most affected category, particularly in sectors such as education (school and school bus operators), transport (staff bus and route bus operators) and tourism (taxi operators, travel operators).
According to the FIDC, the earlier restructuring under Resolution Framework 1.0 was done for MSMEs based on expectations that market conditions would improve and should return to normal by March 2021.
However, these customers, for whom the revival seemed promising in the past quarter, were substantially impacted by the second Covid wave. It, therefore, asked the RBI to provide relief to MSME customers whose contracts were restructured under Resolution Framework 1.0 so that banks can use the window to modify such plans and increase the period of moratorium or extend the residual tenor up to a total of two years.