Microfinance institutions (MFIs) are likely to face severe liquidity and debt servicing challenges if banks do not offer loan repayment moratorium to them, according to rating agencies. Though most of the micro lenders have extended the three-month moratorium, announced by the Reserve Bank of India (RBI), on repayment of term loans to their borrowers, there is an ambiguity on whether the same is applicable for MFIs.
A clarification on repayment moratorium is still awaited from the banking regulator.
“MFIs are yet to formally receive moratorium from their lenders and the absence of the same could severely impact their ability to serve their debt-servicing obligations,” rating agency Icra said in a report.
The industry is going to face a cash shortage for some time after the lockdown is eased as collections from borrowers will remain almost nil, it said. “Moratorium is critical for NBFC-MFIs to sustain their business and tide over liquidity stress as they have announced moratorium to their borrowers,” another rating agency Care Ratings Associate Director Ravi Kumar Dasari told reporters in a webinar Wednesday. Rating firm Crisil in its report said most of its rated MFIs in the investment-grade or with strong parentage have sufficient liquidity to manage repayments and operational expenditure for the next two-three months but for other micro lenders, availing of the moratorium will be critical.