Housing finance firms to get additional liquidity support of ₹20,000 crore

The government on last Friday announced an additional ₹20,000-crore liquidity support to the struggling housing finance companies (HFCs), a move aimed at enhancing their lending capacity.

The additional liquidity support to be provided by the National Housing Bank (NHB) will help the real estate sector which is facing a demand slowdown and cash crunch. The ₹20,000 crore is in addition to ₹10,000 crore support announced earlier by the housing sector regulator NHB. Announcing this as part of measures to prop up the economy, Finance Minister Nirmala Sitharman said now the liquidity support for HFCs would be ₹30,000 crore.

“NHB has already settled some issues ... NBFCs are receiving liquidity from the banks and NBFCs are also moving towards giving credits to people,” the minister said. The government has also decided that a partial credit guarantee scheme to support liquidity crisis in NBFCs, including HFCs, announced in the Budget, will be monitored at the highest level in every bank.

The scheme is for purchase of pooled assets of NBFCs and HFCs up to ₹1 lakh crore. Besides, prepayment notices issued to NBFCs would also be monitored by the banks. The minister also announced steps for co-origination of loans by public sector banks (PSBs) jointly with non-banking finance companies (NBFCs).

“To take advantage of liquidity with PSBs and last mile customer connect of NBFCs, PSBs to fast track collaboration for loans to MSMEs, small traders, self help groups, MFI clients borrowers in co-origination mode with NBFCs,” Sitharaman told reporters. She said the government has decided to “upfront” release ₹70,000 crore as capital for PSBs. This, she said, would lead to additional lending and liquidity to the tune of ₹5 lakh crore in the system.

Sitharaman also informed that banks would be linking their loan products to external benchmark or RBI’s repo rate. They would also be passing RBI’s rate cuts by reducing MCLR to benefit all borrowers. The move would lead to reduction in EMIs for housing and personal loans.