Tag: FIDC

FIDC seeks relaxation on IRACP norms

Banking & Finance

[ad_1]

Read More/Less


Finance Industry Development Council has urged the Reserve Bank of India to exempt small loans up to ₹2 crore given by non-banking finance companies from the new norms for SMA reporting and NPA classification.

It has also requested that the new norms for SMA and NPA classification may be aligned with the date of effect of Scale Based Regulations from October 1, 2022 for NBFCs in all layers.

“This line of approach will give adequate time to the NBFCs to implement changes in the IT systems,” said FIDC, which is a representative body of assets and loan financing NBFCs.

“We also request RBI to clarify that the circular aims at ensuring uniformity in the implementation of IRACP norms across all lending institutions and therefore, does not impact accounting under IND-AS, which all NBFCs have adopted,” FIDC said, noting that in an event where provisions under IND-AS fall short of provisions required under IRACP, the NBFC is anyway required to create an impairment reserve and therefore, adequacy of provisions under IRACP will always be ensured.

RBI’s clarifications

The RBI had on November 12 issued clarifications on prudential norms on income recognition, asset classification and provisioning (IRACP) pertaining to advances.

FIDC noted that the RBI has prescribed the date of SMA/NPA classification of borrower accounts applicable to all loans, including retail loans, irrespective of size of exposure of the lending institution, and shall reflect the asset classification status of an account at the day-end of that calendar date. Further, the upgradation of accounts classified as NPA needs to be done only when the entire arrears of interest and principal is paid by the borrower.

“We are constrained to point out that the aforesaid prescriptions have caused serious issues…We urge upon RBI to take into account the environment in which their borrowers operate and the availability of resources with the NBFCs to continue to subscribe to the economic development of the country,” it said.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

FIDC seeks refinance mechanism for NBFCs

Banking & Finance

[ad_1]

Read More/Less


Finance Industry Development Council (FIDC) has sought a refinancing mechanism for non-banking finance companies and other measures to further credit flow to MSMEs through these shadow banks.

In a letter to SIDBI Chairman and Managing Director S Ramann, FIDC has said there is a dire need for an effective refinance mechanism on similar lines as the NHB refinance to ensure diversity and greater regularity in sources of funds to NBFCs.

“We believe that SIDBI is most suited as an institution to provide such a facility to NBFCs for onward lending to MSMEs and other appropriate sectors,” FIDC said, adding that it has also discussed the issue with the Reserve Bank of India and Finance Ministry.

It has also called for changes in the eligibility criteria used by SIDBI for funding NBFCs, apart from rating.

“While rating should be an important consideration for SIDBI to assess its credit risk, we submit that this may be seen as only one of the criteria, which could be counter-balanced with vintage of NBFC, the track record and experience of the key personnel, financial parameters, credit quality and capital adequacy,” it said, adding that rating should not be used as a qualifying criterion for a “go-no go” decision for lending to NBFCs.

FIDC is a representative body of asset and loan financing of RBI registered NBFCs.

It has sought extension of CGTMSE coverage to loans given to educational institutions. Currently, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) coverage is not available for loans provided by NBFCs to educational institutions.

FIDC pointed out that many educational institutions are now being opened, and there is a need to provide adequate financing for restoring normalcy and enabling their growth.

“Covering these loans under the CGTMSE scheme would facilitate greater flow of funds to this critical sector,” it said.

It also asked that CGTMSE coverage should be restored to 75 per cent of the non-performing asset. Further, FIDC has suggested that arbitration should be considered a valid legal step taken for debt recovery under the ECLGS scheme.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Loan restructuring: FIDC seeks clarity from RBI on relief measures

Banking & Finance

[ad_1]

Read More/Less


The Finance Industry Development Council (FIDC) has written to Reserve Bank of India Governor Shaktikanta Das seeking more clarity and highlighting residual issues in the NBFC sector after the announcement of relief measures for loan restructuring on May 5.

“To clarify or permit restructuring of such MSME accounts, which had been restructured under Restructuring Framework 1.0 and increasing the period of moratorium and/or extending the residual tenor up to a total of two years for MSMEs, along the same lines as the support provided to individuals and small businesses,” said the representation by FIDC, which is the representative body of assets and loan financing companies.

It has also sought inclusion of hybrid use of tractors under the definition of small businesses, thereby allowing restructuring of such mixed-use tractor (equipment) loans.

Moratorium

FIDC has asked for allowing moratorium up to an additional three years, taking both Resolution Framework 1.0 and 2.0 together, for long tenure loans (loans with a residual tenure of at least five years), over and above the period of two years.

“For loans with residual tenure of up to five years: increase the overall moratorium period by additional one year, that is overall cap of three years,” said FIDC, adding that for loans with residual tenure between five years and 10 years, the overall moratorium period should be increased by an additional two years to an overall cap of four years.

Similarly, for loans with residual tenure of over 10 years, the overall moratorium period should be increased by an additional three years to an overall cap of five years.

“It is our earnest request that on the lines of MSMEs, the individuals and small businesses, who are impacted by Covid-19, should also be allowed upgrade even if they slipped into NPA category between April 1, and the date of implementation,” said FIDC, requesting that the RBI should issue an amendment or clarification on the matter.

Given the State-level lockdowns and restrictions in movement, FIDC has also suggested permitting digital delivery of documentation. “Customers be allowed to request and invoke restructuring through video, email, SMS or WhatsApp and restructuring documentation may be allowed to be signed digitally either via e-Sign or through click-wrap method,” it has said in the recommendation.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

FIDC asks RBI to put off norms on auditor appointment by NBFCs to next fiscal

Banking & Finance

[ad_1]

Read More/Less


Finance Industry Development Council has requested the Reserve Bank of India to push back the guidelines for appointment of statutory auditors of banks and non-banking finance companies to April 1, 2022 or fiscal year 2022-23.

To give NBFCs time to comply with the new norms, and “For smooth implementation and minimum disruption, the applicability of the circular can be with effect from April 1, 2022,” FIDC said in a representation to the RBI Governor Shaktikanta Das.

FIDC is a representative body of assets and loan financing NBFCs.

“Most of the NBFCs have already finalised the auditors for 2021-22 and the flexibility of changing auditors in the second half of 2021-22 doesn’t really help as shareholder approval would be required and the notice of the AGM would have already been finalised,” FIDC said.

Further, identifying a new auditor will take some time and it would be difficult for any new auditor to audit the accounts in a six month period, it said.

Cooling period

FIDC has also suggested that the cooling period should be reduced to five years instead of six as this will then better align with the Companies Act.

The RBI had on April 27 issued guidelines for appointment of statutory central auditors and statutory auditors for commercial banks, urban cooperative banks and NBFCs for the financial year 2021-22 and onwards.

UCBs and NBFCs will have the flexibility to adopt these guidelines from the second half of the year. While NBFCs do not have to take prior approval of the RBI for appointment of these auditors, all entities need to inform the RBI about the appointment for each year. Non-deposit taking NBFCs with asset size below ₹1,000 crore can continue with extant procedure.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,

FIDC seeks relief measures in wake of second Covid wave

Banking & Finance

[ad_1]

Read More/Less


Concerned about the impact of the second wave of Covid-19 infections, Finance Industry Development Council has sought relief measures including restructuring for retail and individual borrowers of non banking financial companies (NBFCs).

In a representation to Reserve Bank of India Governor Shaktikanta Das, FIDC has asked that borrower accounts, irrespective of whether or not they had been restructured earlier and if they are standard accounts as on March 31, 2021, may be allowed restructuring without any downgrade in asset classification, subject however to the lending NBFCs undertaking fresh credit assessment of the borrowing entity.

“We wish to bring to your kind notice that the second wave of Covid- 19 has already started impacting the industry, more so the above self- employed segment of customers having little or nothing to fall back upon,” FIDC said in the letter.

NBFCs under pressure

It also pointed out that with many states like Maharashtra, Chhattisgarh, Madhya Pradesh, Karnataka, Rajasthan, Tamil Nadu and NCR already under lockdown or lockdown-like strict conditions, which has resulted in closure of NBFC branches. It is becoming increasingly difficult to reach customers for collections as their business has come to standstill and their livelihoods are under threat, it further said.

“It will not be long before the NBFC industry starts reeling under pressure of increased NPAs and at the same time, handling demand of moratorium and/or restructuring from its existing and deserving customers,” FIDC said.

Loan restructuring

It has also asked the RBI to allow standstill on buckets for restructured accounts for the first quarter of the current fiscal.

FIDC has also sought restructuring of loans taken by small NBFCs (having asset size of less than ₹500 crore) from banks and FIs and to avoid ALM mismatch arising out of restructuring of their customers’ accounts.

It has also asked the RBI for liquidity support to small NBFCs for on lending to micro, small and medium enterprises.

“We urge the RBI to increase the overall support outlay to AIFIs from ₹50,000 crore to at least ₹75,000 crore,” FIDC said, adding that benefit of PSL classification for lending by banks to

NBFCs for on-lending may please be regularised as part of the overall PSL policy.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Non-banking finance cos seek easier rules for cancelling NACH mandates

Banking & Finance

[ad_1]

Read More/Less


Non-banking finance companies, especially those with an asset base of less than ₹500 crore, have sought relaxation in rules for cancelling National Automated Clearing House (NACH) mandates by their customers. The Finance Industry Development Council (FIDC) has written to the National Payments Corporation of India “to provide cancellation facility through simpler means such as Whatsapp and SMS” in a secure manner.

In a letter to the NPCI Managing Director and CEO, Dilip Asbe, FIDC has said this would enable customers to cancel NACH mandates in a simple manner rather than having to access the companies’ websites to carry out such a request. NACH or “National Automated Clearing House (NACH)” for banks, financial institutions, corporates and government is a web-based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature and bulk payments.

‘Best effort’ basis

It has also requested NPCI to allow small NBFCs (with asset base of less than ₹500 crore – which are categorised by the RBI as non-systemically important) to provide such a facility on a “best effort” basis and not as a mandate.

“Most of our members are small NBFCs that operate in limited geographies and provide the vital last mile credit delivery to unserved and under-served segments of the economy including agriculturists, MSME, small road transport operators,” FIDC said in the letter, adding that many of these NBFCs are very small and do not have a well developed website.

Further, many of their customers are not tech-savvy and are not comfortable with transacting on electronic platforms though they may be comfortable in using SMS or WhatsApp, it has said.

“Small NBFCs have, with great difficulty, convinced their customers to use electronic and non-cash means for EMI payments, but still the prevalence of cash repayments is significant,” FIDC said, adding that the provision of the facility for cancellation of NACH mandates is neither feasible nor effective in achieving the ultimate objective of customer empowerment.

NPCI guidelines

In a circular dated September 11, 2020, NPCI had come out with guidelines to provide customers the facility for online cancellation of NACH mandates.

“In order to faciliate online submission of customer request for mandate cancellation, all the entities that are obtaining the mandates from the customer shall provide an option to the customer to submit the stop/cancellation request through their website or any other electronic channels,” NPCI had said in a circular, noting that customers have to reach out to the company or the bank branch and submit the cancellation request in á physical form.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

FIDC appoints TT Srinivasaraghavan as Chairman Emeritus

Banking & Finance

[ad_1]

Read More/Less


The Finance Industry Development Council (FIDC) on Tuesday announced the appointment of TT Srinivasaraghavan, Managing Director, Sundaram Finance, as its Chairman Emeritus.

It also announced Sanjay Chamria, Vice-Chairman and Managing Director, Magma Fincorp, and Umesh Revankar, Managing Director, Shriram Transport Finance Co, as its Co-Chairmen.

The appointments are with effect from April 1, 2021, FIDC said in a statement.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,