Finance Minister Nirmala Sitharaman on Friday welcomed the Reserve Bank of India’s (RBI’s) steps aimed at helping companies and individuals borrow at cheaper rates, improving non-banking finance companies’ (NBFCs’) access to low-cost funds besides assisting banks, companies and real estate firms with reclassification of norms on bad assets.
RBI Governor Shaktikanta Das today delivered a policy rate cut by lowering reverse repo rate by 25 basis points to 3.75 per cent, thus telling banks to not park their excess funds with it and instead lend more to companies and individuals. In steps particularly aimed at improving liquidity for NBFCs and reducing their cost of borrowing, the RBI will launch a second round of targeted long term repo operations (TLTRO 2.0).
Das said the central bank will conduct TLTROs for an amount of Rs 50,000 crore in tranches of appropriate sizes. He said the funds will have to be invested in investment grade bonds, commercial paper, non-convertible debentures of NBFCs with at least 50 per cent of it going to small and mid-sized NBFCs and micro finance institutions (MFIs) within one month of availing the credit from RBI.
The governor said the measures were meant to maintain adequate liquidity in the system and its constituents in the face of covid-19 related dislocations, facilitate and incentivise bank credit flows, ease financial stress, and enable normal functioning of markets.
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