Coronavirus relief package: SIDBI, NABARD, NHB announce refinance schemes for NBFCs, MFIs

Financial institutions SIDBI, NABARD and NHB have announced special refinance schemes for lending institutions to provide liquidity support to the financial system.

This comes after the Reserve Bank of India announced a Rs 50,000 crore refinance support to the industry through these institutions as part of the second set of COVID-19 relief measures announced on April 17.

Of this Rs 50,000 crore sum, RBI had allocated Rs 25,000 crore to the National Bank for Agriculture and Rural Development (NABARD), Rs 15,000 crore to the Small Industries Development Bank of India (SIDBI), and the remaining Rs 10,000 crore to National Housing Bank (NHB).

SIDBI was the first one to announce details for its refinance scheme for banks, NBFCs and Micro Finance Institutions (MFIs) on April 22. As part of this scheme, SIDBI had initially said that lending institutions would have to repay these loans taken from SIDBI within 90 days, drawing a lot of flak from the lenders, who wrote it off as a ‘band-aid’ solution.

Ravi Subramanian, MD of Shriram Housing Finance, had said in a tweet, “This is how a BAND AID Looks on an amputated arm .... a 90 day CP.... well almost!!! And where are NBFCs and MFIs supposed to get funds after 90 days to pay this back?”

Two days later on April 24, SIDBI amended the scheme, clarifying that banks, NBFCs, and MFIs could avail loans of up to one year under this scheme.

It said the scheme would provide support to lending institutions via term loans for onward lending to MSMEs. Any NBFC with over three years of operations, minimum asset size of Rs 50 crore, and a rating of at least BBB- could avail this facility, SIDBI said.

MFIs with ratings of BBB- & above and minimum 3 years of operations and a capital adequacy ratio above RBI requirements for at least the past 24 months would be eligible under the scheme.

For banks, the eligibility criteria has been set at a minimum of 3 years of operations, net worth of at least Rs 100 cr, and Net NPA below 10 percent among others.

National Housing Bank also announced a Rs 10,000 crore refinance facility for the housing sector via Housing Finance Companies (HFCs) and Primary Lending Institutions (PLIs). This scheme was announced to provide short term refinance support to HFCs to mitigate their liquidity risk, and infuse liquidity in the housing finance sector in general.

NHB has said HFCs and PLIs can avail loans of upto 1 year under the scheme. They should have Net NPAs of no more than 7.5 percent, and should have lent at least 51 percent of their total loans to individuals, and have been adversely impacted to the extent of 15 percent or more cash flow hit due to extension of moratorium to customers to be eligible for the scheme. NHB has said that a maximum amount of Rs 750 crore per institution can be borrowed under this scheme.

NABARD also announced a Rs 25,000 crore refinance scheme for NBFC-MFIs, co-operative banks, RRBs. It has clarified that the repayment period under this scheme would be 18 months, even though RBI is providing the SLF or Special Liquidity Facility for a period of one year only. MFI borrowers of NABARD would have to repay the proportionate amount of the balance period in one lump sum at the end of such period, NABARD said.

The balance amount of refinance would have to be paid in one or more instalments as per the schedule decided in the sanction letter.

It said that this SLF facility would be provided at Repo Rate + 300 bps with applicable risk premium, and the balance amount of refinance provided from NABARD’s own resources would be charged at normal lending rates.