SBI agrees to offer moratorium to NBFCS

NEW DELHI: State Bank of India’s executive committee has approved extending the Reserve Bank of India granted moratorium to non banking finance companies (NBFCS) on conditional bases.

In its weekly meeting on Wednesday the committee decided that NBFCS like other companies will be offered a moratorium on interest payment for three months starting March 1. However, these companies will have to show a cash shortage to prove that they will not use the relief to divert funds for other purposes.

“It is not being offered by default. NBFCS will have to apply for it. Our business units will then decide which ones will get the relief. They will have to show their cash inflow and outflow to prove that they need this relief and will not use the money for some other purposes,” said a person with direct knowledge of the decision in the SBI meeting.

SBI’S decision could open the door for other public sector banks to also extend benefits to these lenders.

So far SBI has refused to extend it to NBFCS citing misuse by these borrowers.

SBI argued that unlike non financial companies NBFCS have not been totally hit by the lockdown as some borrowers just like they are servicing their bank loans are also continuing to pay back NBFCS.

It was difficult to check how much of the loans were being paid back by NBFCS.

Also, some back executives were worried that NBFCS which are mostly promoter driven would divert the cash flow gains out of the moratorium to their other businesses or pay off other borrowings like from the bond market.