The Finance Industry Development Council (FIDC), an industry body representing non-banking finance companies (NBFCs), has sought a special liquidity line for the sector against the assets held by these entities which could be used to repay market borrowings in these tough times. Such a line is currently available to banks but not to the NBFC sector.

In a representation to the government and the RBI, the FIDC said despite the central bank announcing several measures to ease the availability of credit and improve the liquidity for NBFCs, banks are reluctant to extend new term loans or working capital facilities, while restricting fresh exposure to only AAA-rated entities or government-owned NBFCs.

As a result, several small and mid-sized NBFCs, which cater to the informal sector such as marginal truck drivers, farmers and MSMEs, are deprived of the liquidity support from the banking system.

The industry body has submitted that banks be advised to provide liquidity support by way of term loans and subscription to bonds and non-convertible debentures (NCDs) of investment grade NBFCs starting from BBB- rating.

The FIDC has also sought the removal of the Rs 20-lakh limit on loans which qualify as priority sector lending in banks’ books. Last month, the RBI had said bank credit to registered NBFCs in the agriculture, MSME and housing sectors up to prescribed limits will be treated as priority sector loans during this fiscal.

The industry body also suggested that the three-month moratorium given to term loans be applied to debt instruments. If such a moratorium is not possible, there should be a mechanism for an auto rollover or re-issue of these instruments.