NBFCs Should Get Loan Moratorium For Passing On Benefit: MAS Financial’s Kamlesh Gandhi
A customer withdraws a stack of Indian twenty rupee banknotes at a branch of the HDFC Bank Ltd. in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)

NBFCs Should Get Loan Moratorium For Passing On Benefit: MAS Financial’s Kamlesh Gandhi

Non-banking financial companies should also be covered under the three-month moratorium allowed by the banking regulator to effectively pass on this relief to borrowers, according to head of MAS Financial Services Ltd.

NBFCs work as an extended arm of the banks in the last-point delivery of credit and so they “deserve the moratorium from banks for the value chain to be maintained”, Kamlesh Gandhi, chairman and managing director at MAS Financial, told Bloomberg Quint in an interview. Gandhi expects the confusion over NBFCs’ inclusion in the moratorium to get settled within a few days as talks are on with the Reserve Bank of India and the finance ministry.

The banking regulator allowed lenders to offer a three-month moratorium on term loans and working capital repayments to support the economy against the stress triggered by the lockdown to contain the Covid-19 pandemic.

While the disruption threatens the asset quality of financial institutions, Gandhi said MAS Financial is comfortably placed. “We have sufficient liquidity on hand to serve our liability for a year. We will not face a problem with repayment as we have high capital adequacy, around 29 percent of the tier-I capital.”

The non-bank lender is engaging with micro, small and medium enterprises to understand how exactly they can start operating after the lockdown, he said, adding that the company doesn’t expect any incremental asset-liability mismatches.

Lockdown and moratorium are temporary but once these are lifted, clients will require more funds to restart businesses, Gandhi said. “So this is where proper liquidity given to NBFCs to pass on to the customers will play an important role in reviving the economy.”

Lending decisions by MAS Financial will be based on how the business goes after the lockdown and the cash-flow position, he said. “A key area of focus will be to extend credit in such a manner that it helps the borrowers. We will understand the business cycle thoroughly and reassess it.”

Also Read: Why Loan Moratorium May Be A Problem For Mutual Funds

‘Days past due’ or delayed repayments might increase for a quarter or two but if basic screening of customers is done with proper understanding the loss given defaults will not be that high, he said.

Also Read: Here’s Who Should Avail RBI’s Covid-19 Moratorium

MAS Financial reduced its cost of funds marginally in the third quarter, he said. “We should get the benefit of low lending rates in the first quarter FY21 and the fourth quarter of FY20 should also see marginal reduction.”

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