RBI to make TLTRO more effective
The RBI is expected to take steps in order to make the Targeted Long Term Repo Operations (TLTRO) more effective so it solves the liquidity crisis of NBFCs. The RBI Governor Shaktikanta Das said that it promises the representatives of NBFCs sector and microfinance sectors that they are working on strengthening the mechanism of TLTRO.
The meeting and discussions:
As per the statement given by RBI, the meeting was held with the representatives of NBFCs and micro financial institutions to discuss the issues regarding unavailability of liquidity from the banks and the extension of loan moratorium. In the meeting, it was requested to shift the loan moratorium period from March-to-May and April-to-June since the repayments from the customers are already collected for the month of March.
The suggestions given by Sa-dhan:
Sa-dhan, the micro lenders association suggested that there should be a direct lending given by the RBI to small and medium financial institutions to sustain the liquidity crisis faced by them. It has also requested for a relaxation in the norms relating to asset classifications for the next 3 months i.e. up to 30th September 2020.
The representatives of NBFC sector for the meeting were Ramesh Iyer, the chairman and TT Srinivasaraghavan, the director of Finance Industry Development Council (FIDC). The chairman Manoj Nambiar and CEO Harsh Shrivastava, the co chairperson K Paul Thomas and executive director P Satish of Sa-dhan attended the meeting as the representatives for the microfinance sector.
TLTRO can inject liquidity for smaller NBFCs:
Some of the industrial leaders said that TLTRO, which has been created by the RBI to solve the problem of illiquidity cannot be accessed by the smaller firms. RBI said that the banks can borrow and invest at least 50% of it in securities issued by microfinance sectors and NBFCs.
The first auction of Rs 25,000 crores had bid just above 50% because the banks were not willing to invest in smaller firms. The RBI identified the reason for such uninterested response and is taking necessary steps to solve it.
Problems of NBFCs & MFIs:
P Satish said to the media that NBFCs and MFIs have started operations on Monday and many of them are finding it difficult to have funds for salary payments and other operational expenses. Nearly 24% of the NBFCs have only received the payment from lenders in the lock down period. If the moratorium is not extended by the SIDBI, Mudra and SBI, it would cause a huge problem since they have a vast exposure to small and medium-sized MFIs.