MUMBAI: Three weeks after it unveiled its first package on March for an economy battered by the Covid – pandemic, the Reserve Bank of India on Friday sought to ensure the solvency of businesses and small non-bank lenders during the extended lockdown period by making available funds to NBFCs. It also allowed banks to delay classifying stressed borrowers as defaulters and also made it less profitable for banks to keep money idle with RBI by reducing the reverse repo rate (the rate it pays for funds parked with it) by the basis points.
Friday’s measures included a Rs , – – crore refinance facility to banks for lending to NBFCs through a new targeted long-term repo lending operation (TLTRO 2), Rs , crore funding support for refinance institutions, and reducing rates on bank funds parked with RBI. The focused liquidity support is intended to avert a crisis in the NBFC sector where lenders had granted moratorium to their borrowers but were not granted any relief on their financial obligations. Finance companies, in turn, have been allowed to relax norms for commercial real estate projects to facilitate their completion.
RBI governor Shaktikanta Das pointed out that the earlier round of liquidity provided through special repos was used by banks to fund public sector entities and large corporates. In addition to the Rs 90, 06 crore to finance companies, RBI set aside another Rs , 19 crore for farm lending, SME lending and housing finance. This is routed through a special refinance facility of Rs 25, (crore for NABARD, Rs) , (crore for SIDBI and Rs) , crore for the National Housing Bank. He also asked banks to skip dividend for FY 27 and use the money to make up for any bad loans.
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SBI chairman Rajnish Kumar said the central bank’s decision to allow a – day standstill for classifying a loan as a non- performing asset will give banks the desired operational flexibility to lend a helping hand to stressed accounts. According to Rashesh Shah , CEO, Edelweiss group, finance companies have been using up their reserves as they had to meet their obligations even as they granted moratorium to their borrowers. “With access to liquidity, NBFCs can now replenish their reserves,” he said. “Given the optimism around the economy coming back in phases and the support being extended through emergency Covid loans and other lines of credit, this will help all sectors, especially MSME and retail,” said Padmaja Chunduru , MD & CEO, Indian Bank.
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 these were not the last of the measures and the central bank would come up with more steps as the situation evolves. Sounding a note of optimism the governor said, “Although social distancing separates us, we stand united and resolute. Eventually, we shall cure; and we shall endure. ”
According to HDFC vice-chairman and CEO Keki Mistry , the measures announced by the RBI will ease the liquidity situation in the markets quite a bit. He said while the direction to banks asking them to skip dividend would result in Rs 1, 19 crore of the dividend not coming in, the overall impact would be offset in a consolidated balance sheet.
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