NBFCs hail RBI's additional liquidity support move to tide through Covid crisis
Non-bank financial players have welcomed the Reserve Bank of India's decision to provide Rs 50,000 crore of additional liquidity support to the sector by conducting targeted long term repo operations (TLTRO 2.0). Shadow banking players also hope to get more liquidity support from banks after the RBI reduced the reverse repo rate by 25 basis points to 3.75 per cent from 4 per cent.
The RBI on Friday said it will conduct (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes.
The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial paper, and non-convertible debentures of
NBFCs, with at least 50 per cent of the total amount availed going to small and mid-sized non-banking financial companies (NBFCs) and micro-finance institutions (MFIs).
"It (TLTRO) is a very-very favourable decision. Now, they (RBI) have specifically allotted (liquidity through TLTRO) to NBFCs, of which 50 per cent will be for small and medium NBFCs. It is a great liquidity support from the RBI,” Mahindra and Mahindra Financial vice chairman and managing director Ramesh Iyer told PTI.
MFIN's CEO Harsh Shrivastava said the microfinance sector is highly appreciative of RBI for acknowledging the industry concerns and for infusing liquidity of Rs 50,000 crore, a substantial part of which will help the small and medium NBFC MFI's to support the bottom of the pyramid customers.
In order to encourage banks to deploy their surplus funds in investments and loans in productive sectors of the economy, the RBI reduced the reverse repo rate to 3.75 per cent.
Shriram Transport's managing director and CEO Umesh Revankar, said the decision to cut the reverse repo rate by 25 bps will encourage banks to look for lending opportunities.
“We would appreciate it if banks reciprocate positively to NBFCs request on moratorium to manage cash flow smoothly,” Revankar said.
The RBI, on March 27, had permitted all lending institutions (LIs) to grant a moratorium of three months on payment of current dues falling between March 1 and May 31, 2020.
On Friday, the RBI said in respect of all accounts for which lending institutions decide to grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period,
“There would be an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020,” it said.
It also allowed NBFC players to extend the date for commencement for commercial operations (DCCO) for loans given commercial real estate by additional one year without considering it as restructuring.
“The 90 day NPA norm won't be applicable to loans where the moratorium is granted. This along with a one year extension on loans given to the real estate sector will help preserve asset quality,” Centrum Group executive chairman Jaspal Bindra said.
The central bank announced to provide special refinance facilities for a total amount of Rs 50,000 crore to Nabard, Sidbi and NHB to enable them to meet sectoral credit needs.
"The special refinance facilities of Rs. 50,000 crore to NHB, Sidbi and Nabard will help meet credit needs of MSME sector and housing finance which has been severely affected by Covid-19,” Capri Global Capital's managing director, Rajesh Sharma said.
Edelweiss Group chairman and CEO Rashesh Shah said RBI has shown its commitment to go the extra mile and more stimulus measures will help in reviving the financial sector.
Tourism Finance Corporation of India (TFCI) managing director and CEO Anirban Chakraborty said the RBI's announcement brings much needed relief to the sectors with an eye on the developing situation at the ground level.
