By Hariprasad Radhakrishnan

The Reserve Bank of India (RBI) on Friday announced special refinance facilities amounting to Rs 50,000 crore to All-India Financial Institutions (AIFIs) like the National Bank for Agriculture and Rural Development (Nabard), Small Industries Development Bank of India (Sidbi) and National Housing Bank (NHB). The measure has been taken by the RBI to meet sectoral credit needs at a time when the institutions are facing difficulty in tapping the market.

The amount of Rs 50,000 crore includes Rs 25,000 crore to Nabard for refinancing regional rural banks (RRBs), cooperative banks and microfinance institutions (MFIs), Rs 15,000 crore to SIDBI for on-lending/refinancing, and Rs 10,000 crore to NHB for supporting housing finance companies (HFCs). Advances under the facility will be charged at the policy repo rate at the time of availment, the central bank said.

The AIFIs raise resources from the market through specified instruments allowed by the RBI, in addition to relying on their internal sources. “In view of the tightening of financial conditions in the wake of the COVID-19 pandemic, these institutions are facing difficulties in raising resources from the market,” RBI governor Shaktikanta Das noted. The measure is expected to help the agriculture and the rural sector, small industries, housing finance companies, NBFCs and MFIs, as the AIFIs play an important role in meeting their long-term funding requirements.

Following the announcement, SBI chairman Rajnish Kumar said that the refinancing support at repo rate to Nabard, SIDBI and NHB will facilitate resource flow to other deserving entities.

Kartthik Srinivasan, senior vice president, group head-financial sector ratings, Icra, said that the Rs 1 lakh-crore funding lines (including indirect funding through Nabard, SIDBI and NHB along with the Rs 50,000 crore TLTRO focused towards non-banks) is expected to take care of nearly 1.5 months of liquidity requirements of NBFCs, HFCs and MFIs. “Unlike the earlier framework, the necessity to invest in mid- and small-sized players would provide access to funds to more entities now,” he said.