Slew of measures to enhance credit flow

With a view to increasing the focus of liquidity measures on revival of activity in specific sectors, the RBI has extended the targeted long-term repo operations (TLTRO) scheme by six months till September 30, 2021.

By Ankur Mishra

The Reserve Bank of India (RBI) on Wednesday announced a slew of measures to enhance the credit flow into the system. The measures include liquidity support of Rs 50,000 crore for fresh lending during FY22 to all India financial institutions (AIFIs) like Nabard, Sidbi, NHB and Exim Bank.

Apart from it, the regulator has enhanced the loan limit for individual farmers to Rs 75 lakh from Rs 50 lakh against pledge of agricultural produce. The RBI has also extended the priority sector lending (PSL) classification benefit for lending by banks to non-banking financial companies (NBFCs) by six months.

“This dispensation which was available from August 13, 2019, till March 31, 2021, is being further extended for another six months, up to September 30, 2021,” the RBI said. In August 2019, RBI had decided that the bank credit to registered NBFCs for on-lending will be considered as priority sector lending.

With a view to increasing the focus of liquidity measures on revival of activity in specific sectors, the RBI has extended the targeted long-term repo operations (TLTRO) scheme by six months till September 30, 2021.

Raj Kiran Rai G, chairman, Indian Banks’ Association and MD & CEO of Union Bank of India, said the extension of on-tap TLTRO scheme and additional funding to AIFIs would help in providing resources for the needy segments of the economy.

SS Mallikarjun Rao, MD and CEO of Punjab National Bank, said, “While the liquidity has been ensured via TLTRO in case the demand picks up, the opportunity of on lending through NBFCs, enhancement of loan limit against warehouse receipts, liquidity facility for AIFIs are all good moves to ensure continued availability of credit which aid faster economic recovery.”

Anil Gupta, vice president, financial sector ratings, ICRA, said extension of the PSL scheme is positive and will further improve credit flow to NBFCs and HFCs for lending to identified sectors. “NBFCs and HFCs have benefitted by accessing the fresh funding lines at competitive rates while enabling banks to meet their PSL requirements with better risk-return perspective,” Gupta said.