The Reserve Bank of India on Friday announced a slew of measures for far better credit flow into the program. The regulator has proposed to provide funds to non-banking economic businesses (NBFCs) from banks below the on-tap targeted extended term repo operations (TLTRO) scheme for lending to some stressed sectors. Similarly, banks will be permitted to deduct credit disbursed to ‘new micro, small and medium enterprises (MSME) borrowers’ from their net demand and time liabilities (NDTL) for calculation of money reserve ratio (CRR).
The central bank stated ‘new MSME borrowers’ would be these who have not availed any credit facilities from the banking program as on January 1, 2021.
This exemption will be obtainable for exposures up to Rs 25 lakh per borrower for credit extended up to the fortnight ending October 1, 2021. Details of the scheme would be spelt out in the circular.
In October final year, the RBI had announced on tap TLTRO scheme for banks. It had stated to conduct on tap TLTRO with tenors of up to 3 years for a total quantity of up to Rs 1 lakh crore at a floating price linked to the policy repo price. The scheme is obtainable till March 31, 2021. NBFC body Finance Industry Development Council (FIDC) had earlier requested RBI to be integrated into TLTRO scheme.
The chairman of the country’s biggest lender State Bank of India (SBI), Dinesh Kumar Khara, stated that an extension of enhanced held to maturity limit (HTM limit), relaxation of funds availability below MSF, an extension of on tap TLTRO to NBFC, deduction of credit disbursed to ‘new MSME borrowers’ from their NDTL for calculation of the CRR will calibrate credit flow and liquidity management. RBI has extended the dispensation of enhanced HTM of 22% up to March 31, 2023, to include things like securities acquired in between April 1, 2021 and March 31, 2022.
Similarly, S.S Mallikarjuna Rao, managing director (MD) and chief executive officer (CEO), Punjab National Bank (PNB), stated that extending the on-tap TLTRO to NBFCs and incentivising lending to new MSME borrowers will assistance lending to these sectors.
Karthik Srinivasan, group head economic sector ratings, ICRA, stated that inclusion of NBFCs below on tap TLTROs is probably to strengthen the credit flow to the NBFC sector in close to term, nonetheless, an extension of time period beyond March 31, 2021, could have been thought of.