Sa-Dhan, one of Microlenders’ largest industrial corporations, has written to the Reserve Bank of India (RBI) seeking an emergency credit line to address the challenges posed by the second wave of COVID-19. Microfinance Institutions (MFIs) are companies that lend money to small lenders by 22-24 percent and mainly get money from banks to do business.
MFIs have demanded an emergency loan line of up to 25 percent of their outstanding loans, Sa-Dhan said. MFIs will be able to raise Rs 15,000 crore if this is used and will help speed up spending on MFIs from banks, Sa-Dhan said in his letter.
Other requirements.
MFIs have demanded a special deposit of at least Rs 15,000 crore through NABARD and SIDBI. “At least 40 percent of the funds below this may be allocated to MFIs with a portfolio of less than Rs 500 million. A funded institution like this will assist MFIs to a large extent,” the council said.
He said the low cost from DFIs will help improve chemicals that are reduced otherwise due to higher credit costs, operating costs and lower prices.
In addition, lending from banks to the microfinance sector under TLTRO (long-term repo operation) should be strengthened and closely monitored by the RBI to ensure timely payments to the sector, Sa-Dhan said.
“If this sector is not supported by $ 25,000 under this financial window, it would be very helpful for MFIs in dealing with their financial and financial challenges. During TLTRO 2.0 we have seen that even large, well-to-do MFIs could not get any support under the window. funding, “said Sa-Dhan.
Other requirements include a 3.0 credit guarantee scheme to increase bank confidence in today’s uncertain times of lending to the microfinance sector especially for small and medium-sized MFIs with very low rates.
Also read : Groww to buy the Indiabulls’ mutual fund business for $ 175
Suspension of loans
Sa-Dhan also requested the termination of loans from banks and development finance institutions or the reconstruction of funding for up to six months to one year. During the first wave of COVID, only 40 percent of lenders offered suspensions of MFIs which resulted in significant financial losses to MFIs, Sa-Dhan said.
It also requested the replacement of the current base rate values linked to the interest rate by price-based values by a total of 26 per cent or the inclusion of the SFB base rate in the general rate calculation.
“As the financial situation of MFIs before and during COVID can be very different, Banks and DFIs may be advised to adhere to certain content lending principles that allow for some relaxation in the balance and replacement of strict pre-COVID standards, so that it will facilitate flow. better finance, “said Sa-Dhan.
Also, MFIs should be allowed to waive in induction practices based on IND-AS by December 2021 to facilitate lower supply and better sales, the letter said.
RBI measures
On May 5, RBI Governor Shaktikanta Das said small financial banks (SFBs) could split loans to MFIs under the premier lender (PSL). The PSL refers to compulsory lending by banks at weak economic levels. Banks need to lend at 40% of their loans at this stage.
To date, lending by SFBs to MFIs on loans is not considered a PSL split. “Due to the new challenges posed by the epidemic and the response to the emerging financial situation of small MFIs, SFBs are now allowed to look at new loans to smaller MFIs (with assets up to Rs500 crore) for individual lenders as the largest lenders in the sector,” he said. RBI Ruler. The facility will be available until March 31, 2022, the RBI said, the governor said.
Also read : Philip Morris phase out cigarettes in Japan within ten years
