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RBI comes up with additional special liquidity facility of Rs 10,000 crore for Nabard, NHB

07 Aug 2020 Evaluate

With an aim to help small financiers and home loan companies amid COVID-19 difficulties, the Reserve Bank of India (RBI) has announced an additional special liquidity facility (ASLF) of Rs 10,000 crore equally split between the National Bank for Agriculture and Rural Development (Nabard) and the National Housing Bank (NHB). RBI Governor Shaktikanta Das said the liquidity facility to both the Nabard and the NHB will be offered at the policy repo rate.

Das said ASLF of Rs 5,000 crore will be given to the NHB to ‘shield the housing sector from liquidity disruptions and augment the flow of finance to the sector through housing finance companies (HFCs)’. Similarly, Rs 5,000 crore will be given to Nabard to ‘ameliorate the stress being faced by smaller non-bank finance companies (NBFCs) and micro-finance institutions in obtaining access to liquidity’.

The RBI has also announced to harmonise the present differential system of capital allocation dictating banks' investments in debt mutual funds and debt exchange traded funds, which will result in substantial capital savings for banks and give a boost to the corporate bond market. On the priority sector lending front, guidelines have been reviewed to give an incentive for banks to address the regional disparities in the flow of priority sector credit.

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