rbi: Industry organizations ask RBI to end daily loan asset classification standard


Leading industry bodies daily call for the Reserve Bank of India’s directive on the classification of loan assets by non-bank financial corporations (NBFCs) to be dropped as the rule could cripple the returning small and medium-sized segment. just back to normal after the impact of the Covid.

Confederation of Indian Industries (CII) and Associated Chambers of Commerce and Industry of India (Assocham) are writing to regulator to review the standard that requires NFBCs to rank loans based on daily repayments.

In their letter to the RBI, industry bodies argued that the strict classification based on daily payments would be difficult to implement for the borrowers they serve because their cash flow and supplies are hit and miss. These borrowers make lump sum payments.

“Our main argument is that we mainly serve small borrowers, truck drivers, owners of light commercial vehicles or even farmers. These people do not have a regular income like wage earners,” said a person familiar with the development. “As a result, payments often don’t arrive on or before the due date, so we give them some leeway, like paying before the end of the month. The strict classification on par with banks will derail this system and could put many borrowers in difficulty. ”

In a clarification earlier this month, RBI said loan accounts should be classified as NPA unless all of the interest and principal arrears are paid by the borrower. NBFCs were also asked to specifically mention the exact due date of loan accounts and the breach of principal as well as interest. These standards have now put the classification of loans by NBFCs on a par with banks and are another step for the RBI to tighten regulations on NBFCs despite serving a different set of customers. The changes will take effect from the next fiscal year.

Crisil said the impact of the new RBI standards on NPA unsecured loans should be in the range of 1.5% to 3%, for MSME funding it should be in the range of 1% to 3 %, and from 1% to 2% for vehicle financing.

Industry leaders are hoping the central bank will at least give them more time or introduce the new standards gradually or gradually.


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