The Reserve Bank of India, on Friday, proposed to provide funds from banks under the TLTRO ‘on tap’ scheme to NBFCs for incremental lending to identified stressed sectors.
Reserve Bank of India Governor Shaktikanta Das noted that NBFCs are well recognised conduits for reaching out last-mile credit and act as a force multiplier in expanding credit to various sectors.
“With a view to support revival of activity in specific stressed sectors that have both backward and forward linkages and have multiplier effects on growth, the RBI had announced the TLTRO on tap scheme for banks on October 9, 2020,” Das said on Friday.
The scheme is available up to March 31, 2021.
“In addition to the five sectors announced under the scheme on October 21, 2020, 26 stressed sectors identified by the Kamath Committee were also brought within the ambit of sectors eligible under on tap TLTRO on December 4, 2020,” noted the Statement on Developmental and Regulatory Policies.
Liquidity availed by banks under the scheme is to be deployed in corporate bonds, commercial paper, and non-convertible debentures issued by entities in these sectors, it further said.
Players expect the move to help NBFCs boost lending and tide over liquidity problems.
Credit delivery
Welcoming the announcement, VP Nandakumar, Managing Director and CEO, Manappuram Finance, said it will enable NBFCs to significantly step up their lending and expand credit delivery at the last mile.
Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, said it will usher in effective liquidity for NBFCs, which would work hand-in-hand with the new co-lending guidelines.
“The positive impact is that it would enhance the NBFCs’ ability to provide a credit lifeline to capital-starved MSMEs, including the NTC small businesses, supporting not only their revival and stabilisation but also help look at growth. The credit impact can be further expanded significantly with the extension of the Partial Credit Guarantee Scheme for portfolio purchase of loans for these sectors,” he said.
Tirthankar Datta, Partner, J Sagar Associates, said this will be a much needed fillip for the NBFC sector after it had been reeling from a liquidity crunch since the IL&FS default in 2018, which was exacerbated by the pandemic.
“This is a great growth oriented and stabilising measure and in line with the NBFC sectors demands, instead of trying to stem the liquidity to address inflation concerns,” he said.