Subscribe

0

  • Sign in with Email

By clicking the button, I accept the Terms of Use of the service and its Privacy Policy, as well as consent to the processing of personal data.

Don’t have an account? Signup

  • Bookmarks
  • My Profile
  • Log Out
  • NEWS
  • POLICIES
  • MSME OPPORTUNITIES
  • BANKING & FINANCE
  • TECHNOLOGY FOR SMES
  • SECTORS
  • GLOBAL
  • Investment
  • LEGAL
  • KNOWLEDGE QUEST
  • Future Ready Forum 2025
  • Ek Nayi Udaan
  • Future Ready Summit 2024
  • ADVERTISE WITH US
ad_close_btn
  • News
  • Policies
  • Banking & Finance
  • MSME Opportunities
  • Web Stories
  • InFocus
  • Technology For SMEs
  • Sectors
  • Global
  • Fashion

Powered by :

You have successfully subscribed the newsletter.
Banking & Finance COVID-19

RBI Measures for NBFCs Seems Ineffective to Boost Credit Flow, says Moody's

Moody's Investors Service Vice-President (Financial Institutions Group) Alka Anbarasu said the measures will soften the near-term credit negative impact on non-banking financial companies' (NBFCs) funding and liquidity.

author-image
SMEStreet Desk
20 Apr 2020 03:30 IST

Follow Us

New Update
Shaktikanta Das, Finance Ministry, NPA, RBI

The Reserve Bank of India's (RBI) measures to help facilitate funds to the NBFC sector are unlikely to boost the credit flow to the broader economy as NBFCs would shore up their own liquidity rather than on-lending to customers, Moody's Investors Service said.

Moody's Investors Service Vice-President (Financial Institutions Group) Alka Anbarasu said the measures will soften the near-term credit negative impact on non-banking financial companies' (NBFCs) funding and liquidity.

On Friday, the RBI said it will conduct second tranche of targeted long-term repo operation (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with. Under this, banks can access three-year funding from the RBI that should be invested in investment grade bonds, commercial paper and non-convertible debentures of non-banking financial companies, with at least 50 per cent of the total amount availed going to small and mid-sized NBFCs and microfinance institutions (MFIs).

"Although the RBI measure will help facilitate funds to the NBFC sector, we don't expect this measure to boost the credit flow to the broader economy as we expect NBFCs to prioritise liquidity over balance sheet growth in the near term," Anbarasu told PTI.

She said the targeted long-term repo operation will help facilitate funds to NBFCs with well-established franchises, for example those with long-operating histories, or to those backed by strong corporate groups.

"Nevertheless, we expect funding conditions for other NBFCs to remain under pressure given the risks to their asset quality," Anbarasu added.

Under the TLTRO 2.0 window, banks availing funds will have to invest 10 per cent in securities issued by MFIs, 15 per cent in securities issued by NBFCs with asset size of Rs 500 crore and below, and 25 per cent in securities issued by NBFCs with asset size of Rs 500-5,000 crore.

The RBI announced the liquidity facility under the TLTRO 2.0 window for NBFCs and MFIs after these institutions failed to get funding under the earlier TLTRO scheme announced late in March.

About Rs 1 lakh crore liquidity has been released into the system in the first tranche of LTRO but banks invested the funds in high-rate papers of companies, thus leaving out small and mid-sized NBFCs. These institutions have been facing liquidity issues following the outbreak of the COVID-19 pandemic and the subsequent lockdown since March 25.

Moody's RBI COVID 19
Subscribe to our Newsletter! Be the first to get exclusive offers and the latest news
logo

Related Articles
Read the Next Article
Latest Stories
Subscribe to our Newsletter! Be the first to get exclusive offers and the latest news

Latest Stories
Latest Stories
    Powered by


    Subscribe to our Newsletter!




    Powered by
    Select Language
    English

    Share this article

    If you liked this article share it with your friends.
    they will thank you later

    Facebook
    Twitter
    Whatsapp

    Copied!