RBI extends fresh support of ₹50,000 crore to NABARD, NHB, SIDBI

Regulator announces committee to strengthen ARCs

April 07, 2021 02:18 pm | Updated 10:59 pm IST - Mumbai

The Reserve Bank of India (RBI) office in New Delhi. File

The Reserve Bank of India (RBI) office in New Delhi. File

The RBI on Wednesday announced various developmental and regulatory policy measures on liquidity management and support to targeted sectors, to help mitigate the impact of the pandemic and help in economic revival.

The central bank decided to extend freshsupport of ₹50,000 crore to the All India Financial Institutions for new lending in FY22. This would help support the continuedflow of credit to the economy in the aftermath of the COVID-19pandemic and to nurture the still-nascent growth impulses.

Accordingly, NABARD will be provided a special liquidity facility (SLF) of ₹25,000 crore for one year to support agriculture and allied activities, the rural non-farm sector and non-banking financial companies-micro finance institutions (NBFC-MFIs), the RBI said.

SLF of ₹10,000 crore will be extended to the National Housing Bank for one year to support the housing sector. SIDBI will be provided ₹15,000 crore under this facility for up to one year for funding of micro, small and medium enterprises (MSMEs). Allthese three facilities will be available at the prevailing policy repo rate.

Signalling the importance of Asset ReconstructionCompanies (ARCs) in the current context to deal with bad loans,the RBI said it would constitute a committee to undertake a comprehensive review of the working of ARCs in the financial sectorecosystem and recommend suitable measures for enabling such entities to meet the growing requirements of the financial sector.

It said while ARCs had grown in number and size, their potentialfor resolving stressed assets was yet to be realised fully.

Priority Sector Lending (PSL) classification for lending by banks to NBFCs for ‘on-lending’ to sectors — which contribute significantly to the economic growth in terms of export and employment —for six more months, i.e. up to September 30, 2021 has been approved. This would provide an impetus to NBFCs providing credit at the bottom of the pyramid.

To augment the liquidity position of the NBFCs, the RBI had in August 2019 allowed banks to classify lending to registered NBFCs (other than MFIs) as PSL up to 5% of a bank’s total PSL, for on-lending to agriculture, MSME and housing till March 31, 2020. This dispensation was later extendedup to March 31, 2021. About ₹37,000 crore has been lent by banks to NBFCs for on-lending to the specified priority sectors tillDecember 2020, the RBI said.

The RBI also decided to enhance the loan limit from ₹50 lakh to ₹75 lakh per borrower against thehypothecation of agricultural produce backed by NWRs/(e-NWRs) issued by warehouses registered and regulated by WDRA. This willlend a boost to credit to individual farmers.

The Priority Sector loan limit backed by other Warehouse Receipts will continue to be ₹50 lakh per borrower, it said.

To increase the focus of liquidity measures on revival of activity in specific sectors thathave both backward and forward linkages and having multiplier effects on growth, the RBI said ti would extend the TLTRO on Tap Scheme by six months, i.e., till September 30, 2021.

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