MUMBAI: Three weeks after it unveiled its first package on March 27 for an economy battered by the Covid-19 pandemic, the

on Friday sought to ensure the solvency of businesses and small non-bank lenders during the extended lockdown period by making available funds to NBFCs. It also allowed banks to delay classifying stressed borrowers as defaulters and also made it less profitable for banks to keep money idle with RBI by reducing the reverse repo rate (the rate it pays for funds parked with it) by 25 basis points.

Friday’s measures included a Rs 50,000-crore refinance facility to banks for lending to NBFCs through a new targeted long-term repo lending operation (TLTRO 2), Rs 50,000 crore funding support for refinance institutions, and reducing rates on bank funds parked with RBI. The focused liquidity support is intended to avert a crisis in the NBFC sector where lenders had granted moratorium to their borrowers but were not granted any relief on their financial obligations. Finance companies, in turn, have been allowed to relax norms for commercial real estate projects to facilitate their completion.

RBI governor

pointed out that the earlier round of liquidity provided through special repos was used by banks to fund public sector entities and large corporates. In addition to the Rs 50,000 crore to finance companies, RBI set aside another Rs 50,000 crore for farm lending, SME lending and housing finance. This is routed through a special refinance facility of Rs 25,000 crore for NABARD, Rs 15,000 crore for SIDBI and Rs 10,000 crore for the National Housing Bank. He also asked banks to skip dividend for FY20 and use the money to make up for any bad loans.

Das acknowledged that banks were avoiding lending by parking close to Rs 6.9 lakh crore with the Reserve Bank of India under its reverse repo program where banks are allowed to park surplus funds. To discourage banks from doing so, RBI has cut the reverse repo rate by 25 basis points to 3.75% from 4%. Finance companies said that the measures still do not address the key problem of getting banks to lend to borrowers who are not top-rated, pointing to the huge amount parked with RBI as an example of the risk aversion of banks. While the RBI cannot force banks to lend, the measures have created the foundation to enable lenders to begin lending if the government comes out with an economic package that will facilitate lending through credit guarantees for small businesses.

More on Covid-19

SBI chairman

said the central bank’s decision to allow a 90-day standstill for classifying a loan as a

will give banks the desired operational flexibility to lend a helping hand to stressed accounts. According to

, CEO, Edelweiss group, finance companies have been using up their reserves as they had to meet their obligations even as they granted moratorium to their borrowers. “With access to liquidity, NBFCs can now replenish their reserves,” he said. “Given the optimism around the economy coming back in phases and the support being extended through emergency Covid loans and other lines of credit, this will help all sectors, especially MSME and retail,” said

, MD & CEO, Indian Bank.

Announcing the measures, Das said in India, the mission is to do whatever it takes to prevent the epidemiological curve from steepening any further. The governor said that because of the epidemic and measures to contain it the macroeconomic and financial landscape has deteriorated, "precipitously in some areas, but light still shines through bravely in some others". He said these were not the last of the measures and the central bank would come up with more steps as the situation evolves. Sounding a note of optimism the governor said, “Although social distancing separates us, we stand united and resolute. Eventually, we shall cure; and we shall endure.”

According to HDFC vice-chairman and CEO

, the measures announced by the RBI will ease the liquidity situation in the markets quite a bit. He said while the direction to banks asking them to skip dividend would result in Rs 1,000 crore of the dividend not coming in, the overall impact would be offset in a consolidated balance sheet.