Microfinance industry hopes IBA meet to lead to ‘in-principle decision’ on loan moratorium to MFIs

‘Some’ banks were giving loan moratorium to ‘some’ of their NBFC-MFIs borrowers.

Microfinance industry bodies expressed hope that a planned meeting of the Indian Banks’ Association (IBA) on Saturday would lead to an ‘in-principle decision’ on offering the loan moratorium to microfinance institutions (MFIs) as the Reserve Bank of India (RBI) did not provide a clarity on NBFC-MFIs request on moratorium on loans from their lenders.

Commenting on RBI’s measures on Friday, MFIN, a Self Regulatory Organisation (SRO) of NBFC-MFIs, said the microfinance sector was highly appreciative of the central bank for acknowledging the industry concerns and for infusing liquidity of Rs 50,000 crore, a substantial part of which would help the small and medium NBFC-MFI’s to support the bottom of the pyramid customers.

Talking to FE, Harsh Shrivastava, CEO, MFIN, said, “We were also looking forward for a moratorium on loans, which would have benefited small and medium MFIs. But that has not come. But, we hope that today’s announcement will provide additional funds for the entities.”

Shrivastava informed that ‘some’ banks were giving loan moratorium to ‘some’ of their NBFC-MFIs borrowers. “But not all the banks are giving it, and small MFIs are not getting this moratorium facilities,” he added. “Tomorrow is an IBA meet. And, we hope that the IBA will decide on the loan moratorium and at least the moratorium will be allowed in principle. Then it is up to the individual banks to offer the facility. It is a commercial call for each bank. IBA has to decide it,” Shrivastava said.

Notably, following RBI’s announcement on allowing a moratorium on term loans for March 1 to May 31, most of the MFIs have extended a moratorium to their borrowers till May 31. “However, the MFIs are yet to formally receive moratorium from their lenders and the absence of the same could severely impact their ability to serve their debt-servicing obligations,” Icra said in a recent note.

Stating that the TLTRO 2 of Rs 50,000 crore would largely benefit big NBFC-MFIs, microfinance lenders’ umbrella body Sa-Dhan’s executive director P Satish said, “We will be pursuing all the banks to extend the moratorium because RBI’s interpretation is quite positive on that.”

Satish said Sa-Dhan and MFIN had already taken up the matter with the Indian Banks’ Association and he expressed hope that in Saturday’s planned meeting all IBA member banks would take a decision on the loan moratorium.

“We welcome RBI’s announcement on TLTRO 2.0 of Rs 50,000 crore for NBFCs and MFIs. This will help infuse liquidity into the system which is reeling under Covid-19 impact. The liquidity infusion in MFIs will eventually help the bottom of the pyramid borrowers. Special refinance facility for Nabard, Sidbi and NHB is also a positive step. We would also appreciate if RBI provides clarity on NBFC-MFIs request on moratorium on loan,” said Kuldip Maity, MD & CEO of VFS.

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