Sa-Dhan and MFIN seek PM Modi's Intervention for Reviewing Moratorium Benefits

Are you a stakeholder of a microfinance institution and worried about facing liquidation? Or is it that you need more grace to repay the loans taken from banks or any NBFCs? If yes, it will give you a sigh of relief to know that two prominent Microfinance industry bodies have written two different letters to our PM Narendra Modi for his intervention. Read on to know everything that’s mentioned in the letters.

Sa-Dhan and MFIN seek PM Modi’s intervention for reviewing moratorium benefits.

Amidst the global economic slowdown, a few Best microfinance industrie (MFIs) are already collapsing by failing to repay their loans within the due period. Further, many such MFIs are on the brink of liquidation, as they failed to convince their lenders for more grace period. Considering this uncertain financial crunch, two MFIs, Sa-Dhan and Microfinance Institutions Network (MFIN), have requested PM Modi to take immediate action for securing repayment moratoriums on term loans. Sa-Dhan consists of more than 200 members and is known to be the country’s largest microfinance industry body. Whereas, MFIN is an MFI group which specifically looks after all the Non-banking Financial Corporations (NBFCs) of India.

The Statements from MFIN’s letter

In the letter, MFIN informs PM Modi that the MFIs are not receiving the same moratorium benefits, as they have been granting to their debtors. Subsequently, MFIN urges PM Modi to direct RBI to take cautious measures and instruct banks and other financial institutions to grant the same moratorium benefits to all India’s MFIs. Further, MFIN feels that this simple act from PM Modi will boost the movement of women empowerment in our country by supporting the survival and aspirations of various women entrepreneurs.

At the end of FY 2019-20, the total outstanding debt of MFIN amounts to nearly Rs. 54,000 crores. More than 65% of the debts are taken from banks, and the remaining debt is known to be acquired from various non-bank lenders, including DFIs like SIDBI (Small Industries Development Bank of India).

The Statements from Sa-Dhan’s letter

Initially, Sa-Dhan alleged that few NBFCs, DFIs, and other financial institutions are in denial and misinformed regarding the moratorium benefits granted to MFIs. It’s because the Government’s package also specifies MFIs, as the moratorium beneficiaries. Further, Sa-Dhan states that it would be difficult to recover the operating cost as a top ten microfinance company in India, leading to significant cash flow and working capital issues due to the non-extension of moratorium benefits. Lastly, Sa-Dhan warns about the various upcoming consequences like the financial downfall of the entire banking and non-banking sector, increasing unemployment, and job-losses, etc., along with the collapse of a robust and well-regulated industry.  

The total outstanding microloans debt through Sa-Dhan turns out to be nearly Rs 2.16 lakh crore. The borrowers include almost 56 million poor women from more than 600 districts of the country. When it comes to segregating the microloan lenders, 85 of them turn out to be NBFC-MFIs, and they contribute nearly Rs. 66,159 crores, whereas 18 NGO-MFIs contribute to nearly Rs. 2,400 crores.

Conclusion

If you are one of the stakeholders in any MFIs, then it’s vital to make sure that RBI instructs the banks and NBFCs to grant the moratorium benefits. This is an effective way to avoid facing any liquidity squeeze, and it’s expected that RBI will soon take the necessary action to ensure that MFIs get the moratorium benefits.