The RBI, on 27 March, permitted lending institutions to offer a three month moratorium to their borrowers with respect to all term loans.
A total of 328 companies from across sectors including the likes of Jindal Steel and Power Limited, JSW Steel Limited and Air India Express Limited, have applied for a moratorium on loan repayments from their lenders to seek the benefit from RBI’s COVID-19 relief package, revealed a document released by rating agency, ICRA.
Other companies that are on the list includes GMR Hospitality and Retail Ltd, GMR Hyderabad Aviation SEZ Limited, Hindustan Copper Limited, Indostar capital finance limited, Kalyan Jewellers India Limited, Madura Micro Finance Limited, Mangalore Refinery and Petrochemicals Limited, among others. The majority of the companies that have applied for the moratorium are BBB-rated or AA-rated companies.
These are the entities rated by ICRA and have either received the approval from the lending institutions or are waiting for it, the agency said. As per the Securities and Exchange Board of India (SEBI) rules, raters are not taking a view of default even in the case of non-payments by companies that have sought moratorium. But, “it may be noted that for the entities that are yet to receive an approval for the moratorium from their lending Institutions, if the same is not received in due course, ICRA would review its stance on default recognition,” the agency said.
The RBI, on 27 March, permitted lending institutions to offer a three-month moratorium to their borrowers with respect to all term loans. This is in the backdrop of the COVID-19 outbreak and the nationwide lock-down that began in late March, bringing most economic activities to a standstill. Most forecasters predict the COVID-19 to impact economic growth significantly in FY21. Companies have seen their cash flows shrinking.
Even Though the RBI has allowed banks to offer moratorium to all terms loans, banks have been reluctant to extend the facility to non-banking finance companies (NBFCs). Some banks have been selectively giving the moratorium facility to NBFCs, but there is no consensus in the industry on this issue. NBFC-MFIs have been particularly hit because of their borrower profile. These entities typically lend to small income borrowers.According to the RBI circular, banks can give moratorium for EMIs falling between March 1 and May 31. Under this, banks are deferring the EMIs of borrowers, but the interest amount will continue to accrue during the moratorium period. When it came to NBFC, the RBI circular did not say anything specific about the moratorium rule. This lack of clarity gave room for industry to interpret that financial intermediaries need not be considered for moratorium facilities.