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Microfinance industry groups seek PM Modi’s help to secure repayment moratoriums on term loans

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KOLKATA: Microfinance industry groups have sought Prime Minister Narendra Modi’s help to secure repayment moratoriums on term loans, having failed earlier to convince their lenders to give them a grace period.

They said that a couple of smaller MFIs have already defaulted their loan repayments last week, while others are facing a liquidity squeeze, since most banks and financial institutions have refrained from extending the moratorium benefit despite Reserve Bank of India‘s advisory on the issue.

“Time is running out. This is a situation when urgent action is required. As RBI did not communicate anything to clarify the issue of moratorium so far, we wrote to the PM for his intervention,” Sa-Dhan executive director P Satish told ET.

Both Sa-dhan, India’s largest microfinance industry body with 212 members, and Microfinance Institutions Network (MFIN), the industry grouping for NBFC-MFIs, have separately urged the prime minister to take action.

“We request you to direct the RBI to instruct all banks and other lenders to kindly pass on the same moratorium (benefit) to us, as all of us are giving to others. This simple step will go a long way to support the aspirations and livelihoods of millions of enterprising women across our nation,” MFIN said in its letter dated April 13.

MFIs borrow from banks, development financial institutions (DFIs) and other non-bank lenders for on-ending to support small entrepreneurial activities like tailoring, cattle rearing, running tea stalls etc. MFIs have passed on the moratorium benefit to the vast swathe of their borrowers after RBI came out with the regulatory package to fight the economic impact of the coronavirus outbreak. Without any repayment collection, there are facing liquidity mismatches.

They have Rs 53,853 crore of outstanding borrowing at the end of March. About two-third of it was from banks while the balance was from non-bank lenders, including DFIs such as Small Industries Development Bank of India (Sidbi).

“There has been some misinformation and even outright denial by some DFIs, NBFCs and a few, but not all banks that the moratorium would not cover microfinance (despite the package specifically mentioning microfinance). Not extending the moratorium will cause MFIs to face significant cash-flow issues, in the absence of any collections even for their operating costs,” Sa-Dhan said in its letter.

“Not only will this destroy this carefully-built up and well-regulated industry, it will also further cause financial instability to banks and other lenders, apart from job losses,” it said.

About 56 million poor women across 620 districts have borrowed micro loans worth Rs 2.16 lakh crore. Out of this, borrowers received Rs 66,159 crore from 85 NBFC-MFIs and another Rs 2,395 crore from 18 NGO-MFIs.

Banks, small finance banks and other NBFCs, too, have microfinance exposure, with retail deposits as their source of funds.



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