India’s Reserve Bank: RBI takes steps to make TLTRO more efficient to increase liquidity for NBFCs

KOLKATA: Reserve Bank of India is said to be taking steps to make targeted long-term repo (TLTRO) operations more effective liquidity for non-bank lenders where the first installment of the liquidity improvement exercise does not deliver the desired result.

governor Shaktikanta Das has insured industry representatives in NBFC and Microfinance sectors through a video call Monday about strengthening that mechanism, said two people familiar with the matter.

In connection with the call with the RBI Summit, including Vice Managers, MD Patra and MK Jain, non-bank providers have sought one-off loan restructuring, change of moratorium period to April to June, and extension of asset rating relaxation until September. Other requirements include direct liquidity support from the central bank MFIs and NBFCs, especially the smaller and medium-sized lenders.

Industry executives said smaller businesses could not access TLTRO, which the RBI created to pump in liquidity through the banking channel. RBI told banks to borrow from it and invest at least half of it in money market instruments issued by small and medium-sized NBFCs and MFIs. The first Rs 25,000 crore auction saw bids of just over 50% of it as banks are unwilling to invest in smaller lenders.

The RBI governor has apparently told industry representatives that the central bank identified the reasons behind the low response and is taking the necessary steps.

The NBFCs were represented by Ramesh Iyer, chairman Finance Industry Development Council (FIDC), a representative body for lending of NBFCs and its director TT Srinivasaraghavan. From the microfinance sector, Microfinance Institutions Network chairman Manoj Nambiar and its CEO Harsh Shrivastava, Sa-Dhan co-chairman K Paul Thomas and CEO P Satish were in attendance.

They have requested the RBI to move the moratorium period to April to June instead of March to May as they had already collected repayment for the month of March when the scheme was announced on March 27.

They have also sought further extension of asset rating easing by another three months until September, as their borrowers may have difficulty repaying loans immediately after the lockout is withdrawn.

While NBFCs and MFIs resumed operations on Monday, approx. half of them may not be able to meet the obligations like payroll and other basic operating expenses due to the lack of cash flow, said P Satish of Sa-Dhan, an industry body for MFIs during the call.

He said only 24 percent of MFIs have received funding from their lenders since the shutdown began. About 51 lenders, including 12 public sector banks and 10 private sector banks, have not yet extended the moratorium on payment to MFIs.

“Most painful is the non-extension of moratorium with Small industries development Bank of India, Mudra and State Bank of India, as they have a lot of exposure to MFIs, especially to the small and medium sized ones, ”said Satish.

“Availability of liquidity from banks and other financial institutions; credit post strategies, including working capital, to MSMEs, traders and bottom of pyramid customers in semi-urban, rural and urban areas, ”was discussed, RBI said in a statement after the meeting.

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