RBI Moratorium: NBFCs stare at asset liability management challenges

Managing liability outflows will be a tightrope walk for NBFCs in the near term

The instant reaction to Friday’s decision by the Reserve Bank of India (RBI) of granting a three-month moratorium on all term loans was welcomed by lenders. But with non-banking financial companies (NBFCs) faced with retiring their short-term liabilities, it appears the joy could be short-lived.

Even as lenders may record the interest accrued (from customers) during this period as income (which would not impact their profit and loss statement), the corresponding cash receipt will not flow through as a result of the moratorium. This, in turn, will affect the cash flows of NBFCs, putting further pressure on their asset-liability management (ALM).