INSUBCONTINENT EXCLUSIVE:
RBI on Tuesday had extended the time limit for asset classification till September 30, 2022
Reserve Bank of India (RBI) has allowed some relaxation for lenders -- including
non-banking financial companies (NBFCs) -- to comply with its new regulations for upgrading non-performing assets (NPAs) as standard ones
but upon clearing all dues
The Reserve Bank on Tuesday had extended the time limit for asset classification till September 30, 2022 as against the previous deadline of
NBFCs shares rallied as Mahindra and Mahindra Financial Services surged 4.52 per cent, IIFL Finance Ltd gained 2.25 per cent,
Poonawalla Fincorp closed 1.54 per cent higher, L-T Finance Holdings jumped 1.18 per cent, Shriram Transport Finance Corporation moved 0.91
per cent higher, Shriram City Union Finance climbed 0.56 per cent and Power Finance Corporation rose 0.58 per cent.As per the RBI norms,
loan accounts classified as bad loans or NPAs may be upgraded as "standard" assets only if the entire arrears of interest and principal are
paid by the borrower.The new RBI circular, issued in November, also makes it mandatory for all lenders to specifically mention -- in the
loan agreements -- the exact due date of a loan and the breakup of the principal and interest, among others, instead of mentioning due
dates, which leaves scope for interpretation.Umesh Revankar, Vice-Chairman and Managing Director, Shriram Transport Finance: "In a welcome
move, RBI has given NBFCs more time to adhere to new norms for upgradation of NPAs to standard assets
The new NPA upgradation guidelines would have led to a spike in NPAs for NBFCs and hence there would have been a need for higher
We are glad for the extension given by the RBI as it will give more time to NBFCs and also it will put less pressure on the overall
borrowers' credit profile."YS Chakravarti, Managing Director and Chief Executive Officer, Shriram City: "The RBIs NPA recognition norm
extension will give some breather to NBFCs bottom line in Q4 FY22 (quarter ending March 2021-22)
Most NBFCs have already absorbed the impact in their third-quarter (Q3) FY22 results
The clarification by RBI only defers the adoption of the new norms
Reversing of provisions already made, although now permitted is unlikely to be the route that NBFCs may follow due to accounting
For Shriram City Union Finance there will be no impact since our loan book is already well provided for
Further, given the strength of our collection efficiency, we expect our delinquencies to progressively reduce in 2022."
