- Non-banking finance companies(NBFC) who are under liquidity crunch and high cost of borrowings has asked for short-term and long-term measures from the government and the Reserve Bank of India (RBI).
- They have asked for a dedicated refinance window for NBFCs’ on the lines of National Housing Bank which provides refinance to housing finance companies.
- The Parliamentary Standing Committee on Finance in their 45th report had also recommended setting up of a new refinance institution for NBFCs.
- NBFCs have said that liquidity window for them will not only help the sector come out of the crisis,it will also infuse confidence among lenders and borrowers thereby pushing consumption demand in the economy.
- Since 1999,the RBI had allowed all banks lending to NBFCs for on-lending to the priority sector to be treated as priority sector lending by banks.
- This gave a huge incentive to banks to lend to NBFCs.While it ensured sufficient bank funding to NBFCs at a reasonable cost, it also facilitated banks to meet their PSL targets.However,this was withdrawn in 2011.NBFCs have asked the same arrangement may be restored urgently.
- Further,they have also asked the government to allow RBI registered small & medium sized NBFCs to avail refinance from MUDRA.
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