Banks are working on a plan to offer NBFCs a three-month moratorium on their loans as the sector has been severely hit by the nationwide lockdown.

The Indian Banks’ Association (IBA) is yet to reach a final decision, but the Reserve Bank of India (RBI) has been kept in the loop.

PTI quoting banking officials said that since individual lenders cannot take a decision on the moratorium, it has to be done at the industry level with regulatory guidance from the central bank.

Apart from instruments like non-convertible debentures or commercial papers, the banking sector is one of the major funding source for NBFCs.

Last month, the RBI had announced a three-month moratorium on the payment of all term loans outstanding as on March 1, 2020.

According to a report from Crisil, the NBFCs are likely to face liquidity challenges because it is not clear if the RBI’s three-month moratorium is applicable on their loans. Poor collections because of the nationwide lockdown has made the situation even more difficult for NBFCs.

The report said the NBFCs faced a double whammy because they were offering a moratorium to customers but were not getting one from their lender banks.

“Given the challenges in accessing fresh funding, and presuming they have nil collections, a number of NBFCs will face liquidity challenges if they do not get a moratorium on servicing their own bank loans and are forced to meet all debt obligations on time,” Crisil’s senior director Krishnan Sitharaman said in the report.

NBFCs have sought clarity from the RBI on the applicability of the moratorium and also on the access to a formal liquidity window, which may provide some structural support similar to that available to banks.

In another representation, NBFCs have requested that some of their staff be allowed to carry out certain essential operations, in a small number and at staggered timings at their branches.

In a letter to home secretary Ajay Bhalla, the Finance Industry Development Council (FIDC) has said that the sector continues to meet its commitments on timely payment of interest and maturity payments of fixed deposit and debenture holders.