Specialised lending institutions such as NABARD, NHB and SIDBI have been provided a liquidity facility of Rs. 50,000 crores to enable lending to SMEs and the housing sector.

Tightening of financial conditions in the wake of the COVID-19 pandemic has made it difficult for these institutions to raise resources from the market. “It has been decided to provide special refinance facilities for a total amount of Rs 50,000 crore to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs” RBI governor Shaktikanta Das said in his media statement. “”These institutions play an important role in meeting the long-term funding requirements of agriculture and the rural sector, small industries, housing finance companies, NBFCs and MFIs”

The central bank’s support will comprise Rs 25,000 crore to Nabard for refinancing regional rural banks (RRBs), and rural cooperative banks, micro finance institutions (MFIs). Rs 15,000 crore support to SIDBI is for on-lending/refinancing and Rs 10,000 crore to NHB will be used for supporting housing finance companies (HFCs). Advances under this facility will be charged at the RBI’s policy repo rate at the time of availing it, the central bank said.

Most of the specialised lenders – National Bank for Agriculture and Rural Development (NABARD), the Small Industries Development Bank of India (SIDBI) and the National Housing Bank (NHB) have been raising funds from the market through instruments allowed by the Reserve Bank in addition to relying on internal resources.

Sidbi will use the funds to refinance banks, NBFCs and MFIs who lend to the MSMEs, the governor said. ” These amounts have been determined and decided in consultation with these institutions. Should there be any additional requirement by these institutions,(then) based on the actual utilisation of resources RBI will assess the situation and take up measures to step up the additional liquidity support” the governor said in his television address.

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