NBFCs climb as RBI grants extension to comply with new NPA norms

16 Feb 2022 , 11:53 AM

Mahindra & Mahindra Financial Services (up 6.18%), Shriram Transport Finance Corporation (up 2.77%), IIFL Finance (up 1.92%), Poonawalla Fincorp (up 1.86), Edelweiss Financial Services (up 1.51%), L&T Finance Holdings (up 1.46%), Muthoot Finance (up 0.96%), Cholamandalam Investment and Finance Company (up 0.42%) advanced.

The Reserve Bank of India (RBI) on Tuesday extended the deadline for non-banking financial companies (NBFCs) to comply with new asset classification norms issued on 12 November 2021. NBFCs will now be allowed to move to the new rules for recognising bad loans by 30 September 2022, as against 31 March 2022.

Paragraph 10 of the (November 12) Circular stipulates that loan accounts classified as NPAs (non-performing assets) may be upgraded as standard asset only if entire arrears of interest and principal are paid by the borrower. NBFCs shall have time till September 30, 2022, to put in place the necessary systems to implement this provision, the central bank said in a notification.

The new guidelines issued late last year had asked non-bank lenders to upgrade bad loans to standard assets only after all interest dues and principal outstanding are repaid across credit facilities. The guidelines seek to harmonise income recognition and asset classification practices at banks and NBFCs. Earlier, NBFCs had sought an extension to comply with the terms of the November 12 circular as applied to micro, small and medium enterprises (MSME) accounts.

The RBI has also issued clarifications in response to queries it had received. The definition of out of order, it said, shall be applicable to all loan products being offered as an overdraft facility, including those not meant for business purposes and/ or which entail interest repayments as the only credits.

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