RBI announces special liquidity facility of Rs 10,000 cr for Nabard, NHB

The liquidity facility to both the Nabard and the NHB will be offered at the policy repo rate, RBI Governor Shaktikanta Das said

The Reserve Bank on Thursday announced an additional special liquidity facility (ASLF) of Rs 10,000 crore equally split between Nabard and the NHB to help small financiers and home loan companies amid COVID-19 difficulties.

The liquidity facility to both the National Bank for Agriculture and Rural Development (Nabard) and the National Housing Bank (NHB) will be offered at the policy repo rate, RBI Governor Shaktikanta Das said.

It can be noted that higher share of moratoriums are being availed by the retail borrowers which has created the need for such liquidity support to lenders in order to meet their repayment commitments. The RBI has announced similar moves in the past as well.

Das said ASLF of Rs 5,000 crore will be given to the NHB to "shield the housing sector from liquidity disruptions and augment the flow of finance to the sector through housing finance companies (HFCs)".

Similarly, Rs 5,000 crore will be given to Nabard to "ameliorate the stress being faced by smaller non-bank finance companies (NBFCs) and micro-finance institutions in obtaining access to liquidity".

The RBI has also announced to harmonise the present differential system of capital allocation dictating banks' investments in debt mutual funds and debt exchange traded funds, which will result in substantial capital savings for banks and give a boost to the corporate bond market.

On the priority sector lending front, guidelines have been reviewed to give an incentive for banks to address the regional disparities in the flow of priority sector credit, Das said.