A slew of measures to enhance credit flow
The expansion of the on-tap TLTRO system and additional funding to AIFIs, according to Raj Kiran Rai G, chairman of the Indian Banks’ Association and MD & CEO of Union Bank of India, would help provide money for the needy segments of the economy.
The Reserve Bank of India (RBI) reported a slew of steps to improve credit flow into the economy on Wednesday. Liquidity funding of Rs 50,000 crore for new lending to all Indian financial institutions (AIFIs) like Nabard, Sidbi, NHB, and Exim Bank is one of the initiatives. There are big tools to enhance credit such as corporate loans, business loans, etc., and small regular use tools like credit cards issued to the public at large.
Aside from that, the regulator increased the loan cap for individual farmers from Rs 50 lakh to Rs 75 lakh against the agricultural produce pledge. Six months by, the RBI has extended the priority sector lending (PSL) designation benefit for bank lending to non-banking financial companies (NBFCs).
The RBI announced that the dispensation, which was in effect from August 13, 2019, to March 31, 2021, has been extended for another six months until September 30, 2021. The Reserve Bank of India (RBI) announced in August 2019 that bank credit to licensed NBFCs for on-lending would be called priority sector lending.
The RBI has expanded the planned long-term repo operations (TLTRO) scheme by six months until September 30, 2021, in order to increase the emphasis of liquidity initiatives on the revival of investment in particular sectors.
The expansion of the on-tap TLTRO system and additional funding to AIFIs, according to Raj Kiran Rai G, chairman of the Indian Banks’ Association and MD & CEO of Union Bank of India, would help provide money for the needy segments of the economy.
Punjab National Bank’s MD and CEO, SS Mallikarjun Rao, said, “While the liquidity has been ensured via TLTRO in case the demand picks up, the opportunity of on-lending through NBFCs, enhancement of loan limit against warehouse receipts, liquidity facility for AIFIs are all good moves to ensure continued availability of credit which aid faster economic recovery.”
According to Anil Gupta, an expansion of the PSL system, vice president, financial sector ratings, ICRA, is optimistic and will increase credit flow to NBFCs and HFCs for lending to specified sectors. “NBFCs and HFCs have benefitted by accessing the fresh funding lines at competitive rates while enabling banks to meet their PSL requirements with better risk-return perspective,” said Gupta.
