NBFCs offer blanket moratorium only to worst-hit; HFCs stick to opt-in option

Non-banking financial companies (NBFCs) will extend the three-month loan moratorium to only the worst-hit segments of their borrower base, such as fleet operators and microfinance borrowers. In loan categories where the salaried class constitutes the bulk of borrowers, non-banks are sticking to the ‘opt-in’ option. This is imperative, given that there is no breather for NBFCs on working capital and market borrowings they have made.

Bajaj Finance is following a request-based channel to offer the moratorium to willing borrowers. At the same time, it has stated upfront that those who choose to avail the moratorium will have to bear the cost of a higher interest outgo. It is also restricting the benefit to loans sanctioned before March 1, 2020, and customers who do not have more than two EMIs due historically in any of their loans.

PNB Housing Finance, too, has an opt-in policy. The company has used an example to demonstrate how a borrower’s interest outgo rises as a result of the three-month payment holiday. 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 avail the moratorium, their interest payable will go up by `1 lakh. “It is, therefore, advisable to restrict the selection of moratorium option only in the scenario of cash flow issues,” the mortgage firm said in a set of FAQs for its borrowers.

L&T Finance is sticking to the opt-in approach for its home loan and rural finance borrowers. The only set of borrowers being given a blanket breather by the company are its microfinance customers. A company spokesperson said that it is conveying the moratorium policy to micro loans customers through its field team, which has regular interactions with borrowers. “We are informing them that interest charges will continue during the moratorium period,” she said.

Shriram Transport Finance Company, which counts fleet operators among the majority of its customers, is extending the moratorium to all its term loan borrowers. It is also allowing a deferral of interest on revolving working capital loans and recalculation of drawing power on such facilities. Umesh Revankar, MD and CEO, Shriram Transport Finance, said that the terms of the moratorium are being communicated to customers by relationship managers. “We are sending SMSes to customers and, additionally, we have relationship executives for every 100-150 customers who are in touch with their clients. The option of moratorium is given to the customers and accordingly collections are made,” he said.

Analysts say that microfinance customers are the most affected group of NBFC borrowers, while the salaried borrower servicing a home loan is likely to be the least affected. “The overall impact of the RBI deferment would be more visible to AFCs (asset finance companies) over HFCs (housing finance companies) since recoveries are better among large-ticket secured loans,” Emkay said in a recent report.

On the liabilities side, NBFCs face a greater challenge as banks have decided to not offer them any interest relief on working capital loans and they must service market borrowings as well. Mutual funds, the largest set of subscribers to NBFC paper, are facing heavy redemptions and are unlikely to roll over their investments. Ajit Velonie, director, Crisil Ratings, said, “While the moratorium provides some relief on the assets side, it is on the liabilities side that challenges could emerge for NBFCs with high share of capital market borrowings. That’s because no moratorium has been announced so far for capital market borrowings (such as bonds and commercial paper) and repayments on these will have to be made on time, during a period when collections would be impacted significantly.”