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Loan moratorium case: NBFCs want govt to refund interest on deposits

Iyer said the penal interest would add up only trite as NBFCs are typically small ticket loan suppliers

NBFCs | Banking sector | loans

Press Trust of India  |  Mumbai 

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Iyer said the penal interest would add up only trite as NBFCs are typically small ticket loan suppliers

Non-banking companies are not worried about "the minimal impact on their loan portfolios" following the apex court order asking lenders not to levy any penal costs on any that were not serviced during the moratorium, but they want the government to compensate them for their cost of fund.

At the apex NBFC body FIDC (Industry Development Council) meeting on Wednesday -- a day after the apex court ruling that asked the government and Reserve Bank to compensate all borrowers as against RBI order that covered only standard under Rs 2 crore, the industry players said, typically NBFC are small ticket credit and therefore they do not see any major impact on their books.

Moreover, all the lenders have had voluntarily made full provisions.

However, they said they would like the government to compensate them for their cost by way of paying interest to their depositors.

"We would like the government to help us some way by compensating us for the cost we have incurred.But it's too early to take a call as we are yet to assess the actual impact on us, collectively and individually," Ramesh Iyer, FIDC chairman and head of Mahindra Finance, said.

Iyer said the penal interest would add up only trite as are typically small ticket loan suppliers.

TT Srinivasaraghavan of Sundaram also said the system-wide impact is very minimal only but they are yet to assess it fully well.

After the SC ruling that also did not extend the moratorium period beyond August 31, 2020, rating agencies Crisil and Icra said, the system-wide interest on interest would be around Rs 14,500 crore, equally split between banks and NBFCs, and that the government which has already made a payout of Rs 6,500 crore, would have to shell out an additional Rs 7,500 crore if it chooses to give the interest waiver as ex-gratia as in the case of small loans.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Wed, March 24 2021. 23:40 IST