NBFCs, MFIs to see Rs 50-60k cr funding gap on lack of moratorium: Report

The RBI may have to open direct liquidity window for small NBFCs and MFIs as banks refuse to offer moratorium to them on one hand, and gave a muted response to the first TLTRO auction, aggravating their funding gap to Rs 50,000-60,000 crore, according to a report.

Small and medium shadow banks and micro-lenders need a direct refinance from financial institutions or the RBI should open direct refinance window for them, Acuite Ratings said, a day after the apex bank said the first TLTRO auction of Rs 25,000 crore saw a tepid response from banks, which put in bids for just half the amount — only Rs 12,850 crore.

“We believe the liquidity concerns of NBFCs (non-bank financial companies) and MFIs (microfinance institutions) have aggravated and a quick response is the need of the hour. The funding gap is estimated to further increase to Rs 50,000-60,000 crore,” the agency said in a report. The estimate is based on the analysis of “the top 11 retail NBFCs which may find the funding gap of Rs 10,000-20,000 crore in Q1. Without the moratorium or partial moratorium from banks, the funding gap will increase further to Rs 15,000-25,000 crore in Q1. Clearly, the gap for the sector including MFIs in Q1 will be much higher at Rs 50,000-60,000 crore based on broad estimates”.

While the Reserve Bank of India has provided a three-month moratorium to all borrowers, including NBFCs and MFIs for March-May, it is increasingly clear that all banks are not likely to grant such a moratorium for their NBFC or MFI borrowers. Further, a 50 per cent response to the first tranche of bids TLTRO 2.0 indicates that banks are hesitant to take fresh exposures to the sector, particularly to small and mid-sized NBFCs, including MFIs now.

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