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On 17th Apr 2020, RBI has unveiled its package to improve the liquidity post COVID. Through Targeted Long Term Repo Operations 2.0 (TLTRO 2.0) it will make available Rs.50,000 crore to the Banks for supporting NBFCs and MFIs and out of the total Rs.50,000 crore, 50% of this should be given by banks to small and mid-sized NBFCs and MFIs. RBI has also allocated Rs.50,000 crore as special refinance facilities at repo rate (4.4%) to NABARD (Rs.25000 crore), SIDBI (Rs.15000 crore) and NHB (Rs.10,000 crore) for refinancing to RRBs, Co-operative banks and MFIs.

If the funds are to be used fully to benefit the microfinance clients at the bottom of the pyramid, the NEXT MOVE by the Banks, NABARD & SIDBI is crucial and the following aspects may be considered by them while formulating products to help the sectors.

Background

The entire world is fighting against the spread of the pandemic “COVID-19” which has unfolded its impact on the economy and on the people of under-developed and developed countries. The World Health Organization has reported that the COVID-19 has spread to 175 countries affecting 17,10,799 people and causing 103,513 deaths so far. This level of disruptions to normal life is unprecedented in the last several decades. For the financial sector and especially for the microfinance sector, COVID-19 has emerged as a black swan event.

1.Target right clients

Target people who are left out of mainstream banking/formal financial system, but who are having entrepreneurial spirits. They require a large amount of credit and they can use the credit more effectively for the purpose and generate incremental income.