NBFCs Seek Relaxation in Eligibility to Recover Loans Under SARFAESI Act

Business Standard NBFCs seek relaxation in eligibility to recover loans under SARFAESI Act

The request has been made considering the recovery of small-ticket loans given to MSMEs, and proposes to bring parity in recovery of soured loans by banks and non-bank lenders.

Non-banking financial companies (NBFCs) have sought relaxation in eligibility to recover loans under the SARFAESI Act from the government.

In the pre-Budget meeting with Finance Minister Nirmala Sitharaman, the Finance Industry Development Council, a representative body for NBFCs, has suggested lowering the minimum ticket size of Rs 50 lakh for loans eligible to be recovered by NBFCs under SARFAESI Act. The request has been made considering the recovery of small-ticket loans given to MSMEs, and proposes to bring parity in recovery of soured loans by banks and non-bank lenders, said Raman Aggarwal, co-chairman of the industry body.

The finance minister, in her Budget 2020-21, had proposed lowering the eligibility limit for debt recovery under the SARFAESI Act from asset size of Rs 500 crore to asset size of Rs 100 crore or loan size from Rs 1 crore to Rs 50 lakh. The NBFCs have also asked the government to expand the Partial Credit Guarantee Scheme 2.0 to include bank lending to NBFCs by way of term loans as such loans are major source of fundraising for such non-bank lenders.

The Rs 45,000-crore Partial Credit Guarantee Scheme 2.0 was launched to provide liquidity support to non-bank, housing finance and microfinance lenders, with public sector banks (PSBs) purchasing their portfolio of bonds and commercial papers.

The government will provide guarantee for the first 20 per cent of the loss.

Under the scheme, public sector banks have approved purchase of bonds and commercial papers of NBFCs worth Rs 27,794 crore as of December 4.