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Below is Comment on RBI giving extension to NBFC to comply with IRACP norms By Mr. Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance

"NBFCs play a crucial role in the economy by providing credit to the underserved segment. Post the challenges posed by the pandemic the overall economic recovery is still uneven with demand conditions yet to fully recover. The Government and the RBI have taken several measures towards economic revival and supporting most impacted sectors, however given the economic recovery is still in a nascent stage, several sectors do need continued regulatory support. In a welcome move, the RBI has given NBFCs more time to adhere to new norms for upgradation of NPAs to standard assets. The new NPA upgradation guidelines would have led to a spike in NPAs for NBFCs and hence there would have been a need for higher provisioning. We are glad for the extension given by the RBI as it will give more time to NBFCs and also it will put less pressure on the overall borrowers credit profile. RBI in a November 2021 circular stated that loan accounts classified as NPAs may be upgraded as ‘standard’ asset only if entire arrears of interest and principal are paid by the borrower. NBFCs were earlier expected to comply with these norms by March 31, 2022 and the RBI has now given extension till September 30. 2022 to put systems in place. We still wish that the individual entrepreneurs and MSME’s below a certain outstanding amount should get total exemption as their cash flow mismatches continue to remain for a long term. We are also hopeful and optimistic that the government focus on capital spending along with the RBI’s accommodative stance will go a long way in supporting broad based economic revival and aid revival in CV sales." 

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