NBFCs seek fresh debt recast as Covid-19 second wave wreaks havoc

 Those who had availed themselves of the recast earlier should get a second chance, the Finance Industry Development Council said in a letter to the RBI

Amid the resurgence of Covid-19 and with states imposing lockdowns, non-banking financial companies (NBFCs) are seeking a revival of the debt restructuring scheme. Those who had availed themselves of the recast earlier should get a second chance, the Finance Industry Development Council (FIDC) said in a letter to the Reserve Bank of India (RBI).

In the letter, addressed to RBI Governor Shaktikanta Das, the industry lobby group said, “Considering the severe second wave of Covid-19, the retail borrowers, including the [micro, small and medium enterprises], as also the retail and wholesale trader industry shall be in urgent need of support from the lenders, to revive their economic activities.”

It added that in this “challenging environment for borrowers and lenders”, it would be helpful, if RBI extends the August 6 notification on one-time restructuring till at least March 31, 2022.

The FIDC has said, borrower accounts, irrespective of whether they have been restructured on an earlier occasion, and if they are standard as of March 31, 2021, should be allowed restructuring without any downgrade in asset classification. Also, RBI may prescribe broad guidelines for restructuring such accounts on the lines of the recommendations made by the Kamath Committee.

They have also sought to restructure benefits for small NBFCs with asset sizes lower than Rs 500 crore, who are dependent on banks for their funding. Else, this may create an asset-liability mismatch for such NBFCs, FIDC said.