Non-bank financial companies (NBFCs) will extend the three-month moratorium on loans to only the most severely affected segments of their borrowers base, such as fleet managers and microfinance borrowers. In borrowing categories where the salaried class makes up the majority of borrowers, non-banks stick to the ‘opt-in’ option. This is imperative as NBFCs have no respite from the working capital and market loans they have taken out.
Bajaj Finance follows a request-based channel to offer the moratorium to willing borrowers. At the same time, it has indicated in advance that those who choose to use the moratorium will have to bear the cost of a higher interest rate. It also limits the benefit to loans approved before March 1, 2020 and customers who have no more than two EMIs historically maturing in one of their loans.
PNB Housing Finance also has an opt-in policy. The company has demonstrated by example how borrowing interest expenses increase as a result of the three-month payment term. A borrower with a home loan of `50 lakh at 8.5% interest for 10 years would have an EMI of` 62,000. Once they take advantage of the moratorium, their interest to be paid will increase by `1 lakh. “It is therefore advisable to limit the choice of the moratorium option only in case of cash flow problems,” the mortgage company said in a series of frequently asked questions for its borrowers.
L&T Finance maintains the opt-in approach for its mortgage and rural finance loans. The only group of borrowers who get a general breather from the company are the microfinance clients. A company spokesperson said it is transferring moratorium policy to microcredit customers through its field team, which has regular contact with borrowers. “We let them know that the interest charges will continue to exist during the moratorium,” she said.
Shriram Transport Finance Company, which counts fleet managers among the majority of its customers, extends the moratorium to all its borrowers over time. It also allows for deferral of interest for revolving working capital loans and recalculation of the drawing power on such facilities. Umesh Revankar, MD and CEO, Shriram Transport Finance, said the terms of the moratorium are communicated to clients by relationship managers. “We send text messages to customers and we also have relationship directors for every 100-150 customers who are in contact with their customers. The possibility of moratorium is given to the customers and direct debits are made accordingly, ”he said.
Analysts say microfinance customers are the most affected group of NBFC borrowers, while the salaried employee who maintains a home loan is likely to be least affected. “The overall impact of the RBI’s deferral would be more visible to AFCs (equity finance companies) over HFCs (home finance companies), as recoveries are better on large-ticket secured loans,” Emkay said in a recent report.
On the liabilities side, NBFCs face a greater challenge as banks have decided not to offer them interest deduction on working capital loans and they must also serve market loans. Mutual funds, the largest group of subscribers on NBFC paper, are facing heavy repayments and are unlikely to turn their investments around. Ajit Velonie, director of Crisil Ratings, said: “While the moratorium provides some relief on the asset side, it is on the liabilities side that challenges could arise for NBFCs with a high share of capital market loans. Because so far no moratorium has been announced for loans on the capital market (such as bonds and commercial paper) and repayment must be made on time, during a period when the collections would be significantly affected. ”