RBI's liquidity window through SIDBI may be a non-starter

MUMBAI: The Reserve Bank of India's (RBI) lifeline to below top-rated non-bank and microfinance lenders may fail to rescue many of them, with the nodal agent Small Industries Development Bank of India capping the tenor of these loans at 90 days.The Rs 15,000 crore the central bank has provisioned for refinance through Sidbi may not be utilised at all if this condition exists, say lending institutions. In a three-page letter to the lenders, Sidbi stipulated that these loans would be repaid in bullet installment after 90 days of the date of withdrawal. “Three months do not make any sense. What will Sidbi do with this money when it gets it back,” said the CEO at a mid-sized NBFC. “We can’t lend this money if we have to pay it back within three months.” In the wake of the Covid-19 pandemic, the RBI provided a special facility of Rs 15,000 crore to Sidbi to provide liquidity support to the MSME sector through banks, NBFCs and MFIs. Tightening of financial conditions in the wake of the pandemic has made it difficult for these institutions to raise resources from the market.“SIDBI's refinance scheme announced will effectively exclude the bulk of medium and small MFIs because of rating requirement of BBB-, only 30 of our member fulfill this norm,” said P Satish, executive director, Sa-Dhan, the largest MFI body with 212 members. The central bank's support also comprised Rs 25,000 crore to Nabard for refinancing regional rural banks, rural cooperative banks, MFIs and Rs 10,000 crore to National Housing Bank (NHB) for supporting housing finance companies.Most of the specialised lenders - Nabard, Sidbi and NHB - have been raising funds from the market through instruments allowed by the RBI besides relying on internal resources.

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