NBFCs hail RBI's additional liquidity support move to tide through Covid crisis

Non-bank financial players have welcomed the Reserve Bank of India's decision to provide Rs 50,000 crore of additional liquidity support to the sector by conducting targeted long term repo operations (TLTRO 2.0).

Shadow banking players also hope to get more liquidity support from banks after the RBI reduced the reverse repo rate by 25 basis points to 3.75 per cent from 4 per cent.

The RBI on Friday said it will conduct (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes.

The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs, with at least 50 per cent of the total amount availed going to small and mid-sized non-banking financial companies (NBFCs) and micro-finance institutions (MFIs).

"It (TLTRO) is a very-very favourable decision. Now, they (RBI) have specifically allotted (liquidity through TLTRO) to NBFCs, of which 50 per cent will be for small and medium NBFCs. It is a great liquidity support from the RBI, Mahindra and Mahindra Financial vice chairman and managing director Ramesh Iyer told PTI.

MFIN's CEO Harsh Shrivastava said the microfinance sector is highly appreciative of RBI for acknowledging the industry concerns and for infusing liquidity of Rs 50,000 crore, a substantial part of which will help the small and medium NBFC MFI's to support the bottom of the pyramid customers.

In order to encourage banks to deploy their surplus funds in investments and loans in productive sectors of the economy, the RBI reduced the reverse repo rate to 3.75 per cent.

Shriram Transport's managing director and CEO Umesh Revankar, said the decision to cut the reverse repo rate by 25 bps will encourage banks to look for lending opportunities.

We would appreciate it if banks reciprocate positively to NBFCsrequest on moratorium to manage cash flow smoothly, Revankar said.

The RBI, on March 27, had permitted all lending institutions (LIs) to grant a moratorium of three months on payment of current dues falling between March 1 and May 31, 2020.

On Friday, the RBI said in respect of all accounts for which lending institutions decide to grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period,