SBI to extend moratorium to NBFCs and microlenders

State Bank of India on Wednesday decided to allow non-banking finance companies to avail of the three month repayment moratorium permitted by Reserve Bank of India, confirmed chairman Rajnish Kumar. The decision was taken at the meeting of the executive committee of the central board

"The moratorium will be given on a case to case basis depending on the cash position of these NBFCs," he clarified.

Mint was the first to report on 5 May about SBI’s plans to consider extending moratorium to NBFCs after coming under pressure from the NBFC sector.

On 27 March, the Reserve Bank of India (RBI) permitted lenders to give a three-month moratorium for all borrowers, but SBI decided not to provide the relief to NBFCs. If India’s largest bank changes its stance, it may prompt most other commercial banks to follow suit.

The rethink follows complaints from the NBFC sector that was shut out of the moratorium offered to all other borrowers from 1 March to 31 May. The Supreme Court directive to the RBI to ensure implementation of its 27 March circular in its “letter and spirit" also added to the pressure on banks, added the banker.

Once the moratorium is granted, SBI may look at reducing the amount of lending available under the second edition of target lending term repo operations, or TLTRO 2.0 for these firms. RBI had allowed banks to access three-year funding worth ₹50,000 crore to be invested in investment-grade papers of NBFCs and MFIs. However, TLTRO 2.0 auctions conducted on 23 April attracted tepid response due to banks’ reluctance to invest in these companies.

Separately, SBI has also made available a special long-term working capital loan facility to its 25 NBFC borrowers with A and BBB ratings.

The decision by the country’s largest bank is likely to have a bearing on the entire industry as many banks are likely to follow suit