NBFCs request RBI Governor to extend the deadline for NPA classification

Non-bank lenders have written to Reserve Bank of India Governor Shaktikanta Das, requesting a delay in the implementation of the new bad loan classification guidelines till October 2022.

NBFCs have also requested that smaller loans up to Rs 2 crore be excluded from the circular, according to an eight-page letter written by the NBFC industry organisation Finance Industry Development Council (FIDC).

According to the new RBI standards, loan accounts can only be upgraded from NPA to ‘standard’ if the borrower pays all interest and principle arrears. According to the circular, lenders must categorise borrowers’ accounts as overdue as part of their day-end procedure, regardless of when that process is run. The new laws are projected to result in a large increase in NBFC bad loans.

“We suggest that the new norms for SMA and NPA classification for NBFCs in all layers be aligned with the date of effect of SBR, i.e. October 1, 2022,” FIDC requested. “RBI has recently introduced Scale Based Regulations (SBR) and prescribed timelines for various norms and for loans above Rs 2 crore where the borrowers can be considered to be financially literate, we suggest that the new norms for SMA and NPA classification be aligned “Smaller debts of up to 2 crore ought to be exempted from SMA reporting and NPA categorization, and so should be exempted.”