RBI extends new ₹ 50,000 crore support to NABARD, NHB, SIDBI
The RBI on Wednesday announced various development policy and regulatory measures on liquidity management and support to targeted sectors, to help mitigate the impact of the pandemic and aid economic recovery.
The central bank has decided to extend further support of ₹ 50,000 crore to financial institutions in India for new loans in FY22. This would help support the continued flow of credit to the economy to the following the COVID-19 pandemic and fueling the still nascent growth impulses.
As a result, NABARD will be granted a Special Liquidity Facility (SLF) of ₹ 25,000 crore for one year to support agriculture and related activities, the rural non-farm sector and non-bank financial corporations-microfinance institutions (NBFC- IMF), says RBI.
A SLF of ₹ 10,000 crore will be extended to the National Housing Bank for one year to support the housing sector. SIDBI will receive ₹ 15,000 crore under this facility for up to one year to finance micro, small and medium enterprises (MSMEs). These three facilities will be available at the prevailing political repo rate.
Signaling the importance of Asset Reconstruction Companies (ARCs) in the current environment for dealing with bad debts, the RBI said it will form a committee to undertake a comprehensive review of the functioning of ARCs in the financial sector system. and recommend appropriate measures to enable these entities to meet the increasing demands of the financial sector.
He said that while CRAs have grown in number and size, their potential for resolving stressed assets is not yet fully realized.
Priority Sector Lending (PSL) classification for loans by banks to NBFCs to “ on-lend ” to sectors – which significantly contribute to economic growth in terms of exports and employment – for an additional six months , i.e. until September 30, 2021 has been approved. This would give a boost to the NBFCs which grant credits at the bottom of the pyramid.
To increase the liquidity position of NBFCs, the RBI had authorized in August 2019 banks to classify loans to registered NBFCs (other than MFIs) as PSL up to 5% of a bank’s total PSL, for on-lending to the bank. agriculture, MSMEs and housing. until March 31, 2020. This waiver was then extended to March 31, 2021. Around ₹ 37,000 crore has been loaned by banks to NBFCs for on-lending to specified priority sectors until December 2020, the RBI said.
The RBI also decided to raise the loan limit from ₹ 50 lakh to ₹ 75 lakh per borrower against the mortgage of agricultural products backed by NWR / (e-NWR) issued by warehouses registered and regulated by the WDRA. This will give credit boost to individual farmers.
The priority sector loan limit backed by other warehouse receipts will continue to be 50 lakh per borrower, he said.
To further focus liquidity measures on resuming activity in specific sectors that have both backward and forward linkages and have multiplier effects on growth, the RBI has said it will extend the TLTRO. on Tap Scheme for six months, i.e. until September 30, 2021.