NBFCs ask RBI again to open TLTRO window to access funds

Mumbai: Nonbank finance companies (NBFCs) have again called on the Reserve Bank of India (RBI) to give them access to the on-tap TLTRO (targeted long term repo operations) window, which provides long-term funds to banks at the policy rate. Despite the RBI introducing several tools to prop up bank funding to non-banks, the latter have been complaining of a persistent lack of liquidity, especially the smaller ones.

The Finance Industry Development Council (FIDC), the NBFC lobby group, has urged RBI governor Shaktikanta Das to direct banks to lend to NBFCs under this scheme to ensure benefits reach a wider segment of borrowers.

“We sincerely appeal to kindly consider our request to carve out a part of the on-tap TLTRO funds for the NBFCs including small NBFCs to avail of loans from banks under the aforesaid scheme for the purposes of on-lending to the desired sectors only,” FIDC said in a letter, a copy of which ET has seen. “We note that while sections including agriculture, MSME and retail are covered, NBFCs have not been included as a sector which could avail of the facility.”


The regulator announced on-tap TLTROs worth ₹1 lakh crore on October 9, when the central bank declared its bi-monthly policy. The money has to be deployed by banks in investment-grade bonds, commercial paper and nonconvertible debentures (NCDs) issued by entities in sectors such as agriculture, secured retail, micro, small and medium enterprises (MSMEs) and healthcare.

“We are seeking clarity on (whether) banks can lend to those five mandated sectors via non-banking finance companies,” said Umesh Revankar, managing director at Shriram Transport Finance. “If not, then an inclusion of NBFCs as a sector will certainly help in furthering the cause for which on-tap TLTRO scheme is announced by RBI. Banks believe in straight business and will always comply with plain vanilla regulations.”

Several attempts to make liquidity available to small non-bank lenders haven’t succeeded. The previous liquidity windows have failed to ensure distribution of resources. As per a CARE Ratings analysis, TLTRO 2.0 did not enjoy success as only₹12,500 crore out of the announced ₹50,000 crore was availed of, while the first edition was crowded out by AAA-rated borrowers.

“MSMEs, small entrepreneurs are all clients that non-banks cater to. It’s high time the government and the regulator realises that banks will not lend to us, so we should be allowed to dip into the TLTRO window directly,” said Raman Aggarwal, area chair, NBFCs, Council for International Economic Understanding. “You look at all the schemes in the last two years, starting from the partial credit guarantee scheme, the Covid emergency line or the TLTRO windows--they have failed to benefit NBFCs, because a large part of these have been routed through banks.”

The failure of non-bank lender IL&FS in 2018 and subsequently DHFL and Altico Capital to make repayments led to risk aversion in the banking system toward NBFC credit.

“Do you think I am in the banking business to have deposits lying with me? Or I am in the business to lend? But will I lend to somebody who I am not sure will give me my money back?” outgoing HDFC Bank managing director Aditya Puri told ET in an interview this week. “I would advise that these firms have to run properly and banks should not be blamed for it. My job is not to lend to unworthy credit.”