The Small Industries Development Bank of India (Sidbi) has sought applications from banks and non-banking financial companies (NBFCs) to avail funds from the Rs 15,000-crore special liquidity facility announced by the central bank last week.
Sidbi will be extending liquidity support to schemes being offered by banks and NBFCs, including microfinance institutions (MFIs), to offer term loans to micro, small and medium enterprises (MSMEs). “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 communication to the lenders, dated April 22.
NBFCs and MFIs that apply for access to funds must have an external rating of at least ‘BBB-’ and their capital adequacy ratio (CAR) must not have fallen below regulatory requirements at any point in the last 24 months. Banks will be eligible to access the facility only if they have made profits in at least two of the last three years and have a net worth of Rs 100 crore. Also, their capital to risk weighted assets ratio (CRAR) should be a minimum of 9% and their net non performing asset (NPA) ratio should be no more than 10%. The eligibility threshold in terms of net worth is the same for small finance banks (SFBs), but their CRAR should be at least 15% and their gross NPA ratio should be no more than 7%.
The tenor of Sidbi’s lending to financial institutions will be 90 days. MSMEs have been cash-starved for a few years and the lockdown to control the spread of Covid-19 is a body blow to their revenues. According to TransUnion Cibil, the total lending to MSMEs with an aggregate credit exposure up to Rs 50 crore is estimated at Rs 17.94 lakh crore and represents about 28% of commercial credit outstanding. The NPA ratio for MSMEs has increased continuously over the last few years to reach 12.6% as of December 2019, the credit bureau said.