Clipped from: https://www.thehindubusinessline.com
NBFCs to be better off if they transparently recognise NPAs
The NITI Aayog on Tuesday said that NBFCs are facing additional incremental liquidity issues on account of the difference in the way they have to give moratorium to their customers and how they are being given the same facility by their lenders i.e banks.
The second issue that NBFCs are facing is the uncertainty over defaults once this moratorium is lifted and the economy returns to normal, Ajit Pai, OSD to Vice-Chairman, NITI Aayog said at a Assocham webinar on Non-Banking Finance Companies.
“Do NBFCs have the capability to tell who is the customer who is going to repay and those who cannot. Are we in a position to understand the risks in the portfolio of NBFCs given that we have had volatile performance for the last 2-3 months? So what are their NPAs going to look like?”, Pai asked.
These are the major issues before NBFCs going into lockdown and coming out of it, he said.
Pai urged NBFCs not to look at restructuring loans of its customers as a bad thing. “Better than looking at them as NPAs in an economy that has seen as significant a reduction as 30-40 per cent and some sectors even seeing 70-80 per cent, a lot of you are going to be better off with restructuring and recognising them as bad rather than postponing them in recognising as NPA,” he said.
He also asked NBFCs not to shy away from going digital, stating that sales have come back must faster in those industries where digital adoption is high.
Pai also underscored the need for NBFC industry to come up with data on a frequent basis as regards the working of the industry.
“We are now working with limited data. Today whether it is the government or regulators, no one knows what’s happening in the industry. I hold the large NBFCs and FIDC responsible for not collating and presenting data on a fortnightly basis so that we know what is going on.
“We know what is happening in bond market, we know what is happening in equity market. We see and collate the data. How will we know what is going on in NBFC. I get banking data every 15 days for advanced. Are some big players not willing to share data. Is FIDC not doing its job. This has made our life difficult in the last two years,” he noted in an apparent reference to the IL& FS and DHFL crises.