RBI provides TLTRO support to NBFCs, lending to unbanked MSMEs

The Reserve Bank of India on Friday announced a slew of measures for better credit flow into the system. The regulator has proposed to provide funds to non-banking financial companies (NBFCs) from banks under the on-tap targeted long term repo operations (TLTRO) scheme for lending to some stressed sectors. Similarly, banks will be allowed to deduct credit disbursed to ‘new micro, small and medium enterprises (MSME) borrowers’ from their net demand and time liabilities (NDTL) for calculation of cash reserve ratio (CRR).

The central bank said ‘new MSME borrowers’ would be those who have not availed any credit facilities from the banking system as on January 1, 2021.

This exemption will be available 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 last year, the RBI had announced on tap TLTRO scheme for banks. It had said to conduct on tap TLTRO with tenors of up to 3 years for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate. The scheme is available till March 31, 2021. NBFC body Finance Industry Development Council (FIDC) had earlier requested RBI to be included into TLTRO scheme.

The chairman of the country’s largest lender State Bank of India (SBI), Dinesh Kumar Khara, said that an extension of enhanced held to maturity limit (HTM limit), relaxation of funds availability under 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 securities acquired 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), said that extending the on-tap TLTRO to NBFCs and incentivising lending to new MSME borrowers will support lending to these sectors.

Karthik Srinivasan, group head financial sector ratings, ICRA, said that inclusion of NBFCs under on tap TLTROs is likely to improve the credit flow to the NBFC sector in near term, however, an extension of time period beyond March 31, 2021, could have been considered.