RBI governor reviews financial sector issues with bank MDs and CEOs
04 May 2020
Reserve Bank of India (RBI) governor on Saturday held meetings with the MD/CEOs of major public and private sector banks, in two separate sessions, through video conference.
The meetings, which were also attended by RBI deputy governors and other senior officials of RBI, among other matters, discussed credit flows to different sectors of the economy, including liquidity to non-banking financial companies, micro finance institutions, housing finance companies, mutual funds, etc.
The meetings also discussed post lockdown credit flows, including provision of working capital, with special focus on credit flows to MSMEs.
Banks have requested RBI to permit them to grant another three months of moratorium relief to their borrowers.
Currently, RBI norms do not permit restructuring of a loan account without first categorising it as a non-performing asset and making the necessary higher provisions.
However, on the issue of moratorium relief for NBFCs, RBI made it very clear in today’s meeting that banks would have to take the call on extending this relief on a case to case basis, as per their own board approved policies.
On the much-debated issue of moratorium relief for NBFCs, RBI made it very clear in that banks would have to take the call on extending this relief on a case to case basis.
Currently, TLTRO 2.0 funds can only be used by banks to invest in investment grade bonds issued by MFIs and NBFCs, but not for direct lending.
The meeting also discussed issues like monitoring of overseas branches of banks in view of the slowdown in economies across the globe, besides stability of the financial sector, RBI said in its statement.
In the past few weeks RBI announced various measures for liquidity support to NBFCs, MFI and mutual funds. But, with banks also parking large sums of money of over Rs7- 7.5 lakh crore with RBI, instead of utilising funds for lending, RBI’s TLTRO 2.0, or the Special Liquidity Facility for Mutual Funds are unlikely to achieve the desired objective.