Rs 50,000-Rs 60, 000 Crore funding gap imminent for MFIs and NBFCs

By - Paisafatafat Blog

  • 2020-04-27 12:17:54
  • Finance

A report declared that banks have refused to provide moratorium to MFIs & NBFCs and also, have given a very soft response to first of RBI TLTRO auction thereby further widening the gap of funding to nearly Rs 50, 000 to Rs 60, 000 Crore. This may cause the Reserve Bank of India (RBI) to open a window to foster direct liquidity for the small MFIs & NBFCs. 

The small as well as medium sized micro-lenders and shadow banks, may require direct refinancing from the various financial institutions or the Reserve Bank of India should open a window for direct refinancing for these banks. The weak response from the various banks at the first of RBI’s TLTRO auction amounting to Rs 25, 000 crore called for bids for just Rs 12, 850; i.e. merely half the net amount. In its report, the Acuité Ratings & Research Limited agency said, "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," 

This estimate came up after an in-depth analysis conducted on the ‘Top 11 retail NBFCs’ that are likely to experience a funding gap amounting to Rs 10, 000 crore to Rs 20, 000 crore in the first quarter of this financial year. It has been also forecasted that in the absence of full or partial moratorium from the various banks this funding gap may widen further. While the RBI has offered a moratorium of 3 months spanning across March, April & May to all its borrowers including the MFIs & NBFCs, it is quite evident that all the banks do not wish to agree to such moratorium for their MFI and NBFC borrowers. Moreover a response of just 50% to the TLTRO bid’s first part, it is clear that most banks are reluctant to accept any new exposure to small as well as NBFCs and MFIs as of now.


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