The Reserve Bank of India (RBI) has announced a host of measures to provide liquidity support to non-banking financial companies (NBFCs), apart from giving them certain benefits for loans extended to the commercial real estate sector.
To begin with, banks have to invest the funds availed under targeted long-term repo operation (TLTRO), in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs. RBI stipulated that small and mid-sized NBFCs and micro-finance institutions (MFIs) should receive at least 50% of these funds.
Auction on April 23
Banks can avail ₹50,000 crore through the targeted long-term repo operation. The first auction of TLTRO for ₹25,000 crore will be conducted on April 23.
Of the 50% stipulated for smaller entities, 10% has to be invested by banks in securities of MFIs, 15% in securities issued by NBFCs with asset size of ₹ 500 crore and below; and 25% in securities issued by NBFCs with assets size between ₹500 crore and ₹5,000 crore.
“These investments have to be made within one month of availing liquidity from the RBI,” the banking regulator said. The RBI clarified that investments made by banks under this facility would be classified as ‘held-to-maturity’ (HTM), even in excess of 25% of the 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.
The RBI has also decided to provide special refinance facility of ₹50,000 crore to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs. This would 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 ₹10,000 crore to NHB for supporting housing finance companies (HFCs).
The regulator has also allowed non-banking institutions to extend the date for commencement for commercial operations (DCCO) by an additional one year, without treating the same as restructuring, if the project is delayed due to reasons beyond the control of the promoter.