The Reserve Bank of India (RBI) on Saturday addressed the issue of improving credit flows to various sectors of the economy, including non-bank financial corporations (NBFCs) and micro, small and medium enterprises (MSMEs) with the heads of large private companies. and public sector banks. However, the banks said they were seeking government credit guarantee support while providing loans to NBFCs and also proposed that a decision on extending the three-month moratorium on loan repayments. can be taken at the end of May.
The RBI review, called by Governor Shaktikanta Das, came at a time when non-food credit fell from Rs 33,872 crore to Rs 102.8 lakh crore during the fortnight ended April 10 and the government extended the lockdown for another two weeks until May 17. .
The meeting reviewed the current economic situation and credit flows to different sectors of the economy, including liquidity to NBFCs, microfinance institutions, housing finance companies and mutual funds, a said the RBI. The meeting, conducted by videoconference, also addressed post-containment credit flows, including the provision of working capital, with particular emphasis on credit flows to MSMEs and the implementation of a three-month moratorium. on the repayment of loan maturities announced by the RBI.
Banks want government guarantee
With many sectors in the doldrums due to the foreclosure, banks expect a rise in bad debts after June, when the moratorium period ends. The extension of the moratorium and a state guarantee program will give more comfort to banks which are now risk-averse.
While banks had extended the moratorium on loans to their customers, they did not extend the same facility to NBFCs and MFIs, which borrow from banks. Regarding the extension of government guarantees to loans to MSMEs and NBFCs, the CEO of a nationalized bank said: “In many countries the government has intervened and it gives guarantees especially for loans or additional credit, even to the MSME sector. This means that the liability will be contingent on the government’s books and banks can take advantage of these guarantees. Banks say this can be a good model to help borrowers, especially MSMEs, it is not clear if the government is in favor of such a proposal.
Regarding the weak flow of credit to various sectors, a bank official said: “Unless economic activity picks up, the demand for credit is not expected to increase and the lack of credit growth is not, in my opinion. currently, due to aversion to risk. . “Although many PSU banks have offered Covid-19 loans to MSMEs, credit flows did not reach desired levels. The RBI has conducted long-term repo transactions (LTROs) for banks at the 4.40 percent repo rate, but banks prefer higher-rated companies while ignoring claims from small units and NBFCs. On extending the moratorium beyond May 31, he said: “Let’s wait until May 31 and then see what the demand is or what the situation is and depending on the situation on the ground, I think those are. things that the RBI can take a view and take a calibrated approach to. I think the next view will probably be taken after May 31st. “
According to the RBI, the governor “appreciated the efforts of banks to ensure normal to near-normal operations” during the lockdown … Oversight of bank branches abroad given slowing economies around the world and stability the financial sector was discussed.
Bank deposits increase on exits from the debt UCITS segment
While banks experienced a contraction in outstanding loans, deposits increased during the fortnight ended April 10. Deposits increased from Rs 1,47,435 crore to Rs 137.1 lakh crore, largely due to outflows from the debt mutual fund segment. However, sight deposits (savings accounts) saw an outflow of Rs 1.35 lakh crore, while term deposits (DF) jumped by Rs 2.82 lakh crore. ENS