RBI package: Restructuring of loans should be allowed, says Keki Mistry

Mistry tells Joydeep Ghosh that while the National Housing Bank has been allowed to refinance housing finance companies, relaxation of single-party exposure would be a big help

After keeping non-banking financial companies (NBFCs) on tenterhooks for about 10 days, the Reserve Bank of India (RBI) introduced a host of measures on Friday to ease their pain. Keki Mistry, vice-chairman and chief executive officer of Housing Development Finance Corporation (HDFC), tells Joydeep Ghosh that while the National Housing Bank (NHB) has been allowed to refinance housing finance companies (HFCs), relaxation of single-party exposure would be a big help. Edited excerpts:

RBI announced a slew of measures for NBFCs. Are they enough? 

It is a step in the right direction, especially since around 50 per of the money will be deployed towards small and mid-sized NBFCs and micro-finance companies. These segments would require this additional liquidity quite badly. Another window that has been opened for HFCs is to refinance them through the NHB. However, it is not clear if the single-party exposure has been relaxed as well, because that would be a big help for many HFCs.

What are the key problems that NBFCs are facing?

It’s not just NBFCs, several sectors are in serious trouble. For example, real estate, airlines, tourism or hotels are going through severe stress. So, while they have been given a moratorium and can defer repayments, it might not be enough. There should also have been a provision for restructuring loans. Soon after the moratorium is over, a lot of loans might come up for repayments. In such circumstances, one would have liked to see more restructuring being allowed.

How do you think the housing market will pan out in the next few quarters since the repayment capability of many borrowers will be hit because of salary cuts/job losses?

Since housing finance per se is secured lending, and single-largest purchase for many households, people are unlikely to default too much. Yes, there could be some problems, but hopefully, there will be a temporary impact and like in 2008, things will bounce back soon.

Is this worse than 2008?

Oh yes, I think this is much worse. Back in 2008-09 it was a financial crisis, and there were solutions to resolve it. There are few answers now in terms of controlling the spread of this virus. Till we have a vaccine or proper medical facilities to treat patients, one does not know where this will go.