The Reserve Bank of India (RBI) has announced a host of measures to provide liquidity support to the non-banking finance companies, apart from giving them certain benefits for loans extended to the commercial real estate sector.
To begin with, the banking regulator said banks to have to invest the funds availed under targeted long term repo operations, in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs and stipulated that small and mid-sized NBFCs and micro finance institutes should receive at least 50% of these funds. Banks can avail ₹50,000 crore through the targeted long term repo operations.
“These investments have to be made within one month of the availment of liquidity from the RBI,” the banking regulator said. It has also clarified that investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 per cent of total investment permitted to be included in the HTM portfolio.
“This will in turn ease the liquidity problem faced by NBFCs and MFIs to some extent, if their lender bank does not provide moratorium on payment of instalment and interest which they are extending to their customers,” said Deo Shankar Tripathi, MD & CEO of Aadhar Housing Finance. NBFCs and housing finance companies are facing liquidity pressure since banks have not extended any repayment moratorium to these entities even if, NBFCs have to provide the same for their borrowers.
RBI has also decided to provide special refinance facilities of ₹50,000 crore to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs. This will comprise ₹25,000 crore to NABARD for refinancing regional rural banks (RRBs), cooperative banks and micro finance institutions (MFIs), ₹15,000 crore to SIDBI for on-lending/refinancing; and Rs. 10,000 crore to NHB for supporting housing finance companies (HFCs).
The regulator has also provided some relief to the non-banks for their loans to commercial real estate exposure by allowing them to extend the date for commencement for commercial operations (DCCO) by additional one year, without treating the same as restructuring, if the project is delayed due to reasons which are beyond the control of the promoter. Restructuring could have meant higher provision for the lender.
“This will provide relief to NBFCs as well as the real estate sector,” RBI said.
