The measures on Friday included a 50,000 crore rupee refinancing facility to banks for lending to NBFCs through a new long-term repo loan (TLTRO 2), financial support of 50,000 crore rupees for credit institutions. refinancing and a reduction in rates on bank funds parked with RBI. The targeted liquidity support is aimed at avoiding a crisis in the NBFC sector where lenders had granted a moratorium to their borrowers but had not received any relief from their financial obligations. The finance companies were in turn authorized to relax the standards applicable to commercial real estate projects in order to facilitate their realization.
RBI Governor Shaktikanta Das pointed out that the first round of liquidity provided through special pensions had been used by banks to finance public sector entities and large companies. In addition to the crore of 50,000 rupees to finance businesses, RBI has set aside another crore of 50,000 rupees for agricultural loans, loans to SMEs and housing finance. This is channeled through a special refinancing facility of Rs 25,000 crore for NABARD, Rs 15,000 crore for SIDBI and Rs 10,000 crore for the National Housing Bank. He also asked the banks to skip the dividend for fiscal year 20 and use the money to offset bad debts.
Das acknowledged that banks were avoiding lending by parking near Rs 6.9 lakh crore with the Reserve Bank of India as part of its reverse repo program where banks are allowed to park excess funds. To discourage banks from doing so, RBI reduced the repo rate by 25 basis points to 3.75% from 4%. Finance companies said the measures still do not solve the key problem of forcing banks to lend to borrowers who are not top rated, highlighting the huge amount parked at RBI as an example of risk aversion banks. Although the RBI cannot force banks to lend, the measures have created the basis to allow lenders to start lending if the government presents an economic package that will facilitate lending through credit guarantees for small businesses.
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SBI President Rajnish Kumar said the central bank’s decision to allow a 90-day halt to classify a loan as a non-performing asset will give banks the operational flexibility they need to lend a hand to troubled accounts. According to Rashesh Shah, CEO of the Edelweiss group, the finance companies have exhausted their reserves because they had to meet their obligations while granting a moratorium on their borrowers. “With access to liquidity, the NBFCs can now replenish their reserves,” he said. “Given the optimism surrounding the return to the economy in phases and the extension of support through Covid Emergency Loans and other lines of credit, this will help all sectors, especially MSMEs and retail, “said Padmaja Chunduru, managing director and chief executive officer, Indian Bank.
In announcing these measures, said Das in India, the mission is to do everything in his power to prevent the epidemiological curve from worsening further. The governor said that because of the epidemic and measures to contain it, the macroeconomic and financial landscape has deteriorated, “precipitously in some regions, but the light is still shining brightly in others.” He said these measures were not the last and that the central bank would propose other measures as the situation evolves. Seeming optimistic, the governor said, “Although social distance separates us, we remain united and resolved. Finally, we will heal; and we will endure. ”
According to the vice-president and chief executive officer of HDFC, Keki Mistry, the measures announced by the RBI will slightly ease the liquidity situation in the markets. He said that if the instructions to the banks asking them to skip the dividend would result in a rupee of 1,000 crore rupees, the overall impact would be offset in a consolidated balance sheet.