In the wake of the COVID-19 pandemic, Reserve Bank of India has announced a special refinance facility of Rs 50,000 crore to specialised financial institutions such as NABARD, SIDBI and NHB to help them meet funding requirements of agriculture and the rural sector, small industries, housing finance companies, NBFCs and MFIs. Accordingly, these lending institutions have launched special refinance schemes to meet the credit needs of these sectors, which were hit hard by the coronavirus lockdown.
Of Rs 50,000 crore, Rs 25,000 crore were allotted to National Bank for Agriculture and Rural Development (NABARD) for refinancing regional rural banks (RRBs), cooperative banks and micro finance institutions (MFIs); Rs 15,000 crore to Small Industries Development Bank of India (SIDBI) for on-lending/refinancing to small and medium businesses; and Rs 10,000 crore to National Housing Bank for funding housing finance companies (HFCs).
National Housing Bank (NHB) launched Special Refinance Facility (SRF) scheme to provide short term loan to housing finance companies (HFCs) and other eligible primary lending institutions (PLIs) which would help them partially mitigate their liquidity risk and improve the liquidity into the overall housing finance system. The total amount allocated under this scheme is Rs 10,000 crore.
"HFCs/PLIs are required to utilise the funds drawn under this facility for disbursement of individual housing loans falling under the category of priority sector, as defined by RBI, over a period of one year period," the NHB said.
The state-owned NHB has said HFCs and PLIs can avail loans of upto 1 year under the scheme. Under this scheme, an entity can borrow up to 20 per cent of the Net Owned Fund (NOF) or maximum amount of Rs 750 crore, whichever is lower. The scheme will be available to only eligible lending institutions, who have Net NPAs not exceeding 7.5 per cent, and must have lent at least 51 per cent of their total loans to individuals, and have at least 15 per cent or more cash flow hit due to period of moratorium.
Similarly, NABARD announced a Rs 25,000 crore refinance facility for rural co-operative banks, RRBs, MFIs and NBFCs. The government-owned entity said that it will provide an 18-month term loan to MFI borrowers, besides extending the one-year special refinance scheme as directed by Reserve Bank of India. The borrowers would have to repay the proportionate amount of the balance period in one lump sum at the end of such period.
SIDBI launched a liquidity support scheme for banks, NBFCs and MFIs impacted by the COVID-19 pandemic on April 22. "The schemes would cover all eligible entities having investment grade ratings irrespective of the size of the organisation to ensure wider coverage," SIDBI said in a statement.
To avail the loan, NBFCs and MFIs should have been in business for at least three years and have an external rating of BBB- or superior as on March 31, 2020, SIDBI said. Qualifying NBFCs are required to have minimum net worth of Rs 20 crore, and a minimum asset size of Rs 50 crore. Initially, the borrowers were asked to repay these loans within 90 days, which was later extended up to one year after it received a lot of flak from the lenders.