Covid-19 lockdown period, the
Reserve Bank of India announced measures to make available funds to NBFCs, push banks to lend and delay borrowers from being classified defaulters.
The highlight of Friday’s measures are: A Rs 50,000 crore refinance facility to banks for lending to NBFCs through a new targeted long-term repo lending operation (
TLTRO 2), a Rs 50,000 cr funding support for refinance institutions and reducing rates on bank funds parked with RBI.
Shaktikanta Das pointed out that the earlier TLTRO funds were used for investing in bonds issued by public sector entities and large corporates. In addition to the Rs 50,000 crore to finance companies, RBI set aside another Rs 50,000 crore for farm lending, SME lending and housing finance.
These lenders will get a special refinance facility to refinance to the extent of Rs 25,000 crore from NABARD, Rs 15,000 crore from SIDBI and Rs 10,000 crore from the National Housing Bank (NHB).
Das acknowledged that banks were avoiding lending by parking close to Rs 6.9 lakh crore with the Reserve Bank of India under its reverse repo program where banks are allowed to park surplus funds. To discourage banks from doing so RBI has cut the reverse repo rate by 25 basis points to 3.75% from 4%.
Finance companies said that the measures still do not address the key problem of getting banks to lend to borrowers who are not top-rated pointing out to the Rs 6.9 lakh crores parked with RBI as an example of the risk aversion of banks. While the RBI cannot force banks to lend, the measures have created the foundation to enable lenders to begin lending if the government comes out with an economic package that will facilitate lending through credit guarantees for small businesses.
Announcing the measures, Das said in India, the mission is to do whatever it takes to prevent the epidemiological curve from steepening any further. The governor said that because of the epidemic and measures to contain it the macroeconomic and financial landscape has deteriorated, precipitously in some areas; but light still shines through bravely in some others. He said that these were not the last of the measures and the central bank would come up with more steps as the situation evolves.
According to HDFC vice-chairman and CEO Keki Mistry the measures announced by the RBI eases the liquidity situation in the markets quite a bit. He said that while the direction to banks asking them to skip dividend would result in Rs 1000 crore of the dividend not coming in, the overall impact would be offset in a consolidated balance sheet.