NBFCs request special funding window from banks to handle liquidity crisis

In a bid to handle the stress of liquidity crisis that might occur due to the COVID-19 crisis, Non-banking finance companies (NBFCs) have requested for an additional funding window from banks.

NBFCs Non-banking finance companies (NBFCs) cater to the MSME, infrastructure and real estate sectors that are highly impacted by the Covid-19 related stress.

In a written communiqué to the government on behalf of the NBFC sector, industry body FICCI requested for a special liquidity line to NBFCs from banks as well as a major allocation from the Reserve Bank of India’s targeted long-term repo auction (TLTRO) operations exclusive and mandatory flowing to the sector.

“This could be done in two forms – by giving an additional 10 per cent loan by banks under a special Covid-19 programme and an amount of 10 per cent of total borrowings as refinance against existing listed non-convertible debentures (NCDs) held by the NBFC/housing finance companies also,” FICCI suggested in a letter written to the government to help meet funding requirement of NBFCs.

Last week, the RBI had talked about conducting TLTRO of up to Rs 1 lakh crore. Liquidity availed under the scheme by banks are required to be deployed in investment grade corporate bonds, commercial paper, and non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 27, 2020.

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