On 17th Apr 2020, RBI announced the TLTRO 2.0 (Targeted Long-Term Repo Operations), wherein it has set apart Rs.50,000 as refinance support to NABARD, SIDBI and NHB and Rs.50000 to banks for on-lending to NBFCs and MFIs.  I am surprised to note the poor offtake for the TLTRO 2.0 (Targeted Long-Term Repo Operations) offer of Rs.25,000 crore by RBI on 23rd April 2020 to the banks. The bids put in by banks were for Rs.12850 just,  half of the offer. Banks should come forward to use the TLTRO funds without hesitation to fund the NBFCs and MFIs especially small and medium MFIs which have the last mile connectivity to help the people at the Bottom of the pyramid.

Apart from pushing the loans through NBFCs and MFIs, they should also come out with special COVID loans to directly lend to SHGs (Self Help Groups).

COVID Hybrid loan

Thanks to the efforts of banks viz. SBI, Bank of Baroda, IOB, PNB & Indian Bank which have come out with special loan products for Self Help Groups as COVID response. Most of the loan products have a term of 36 months and 6 months holiday period. There is a lot of uncertainty on when the economy will be back to normalcy or near normalcy and we do not know whether it will take 3 or 6 months. Hence, it would be better if the Banks offer the COVID special loans to SHGs as a COVID Hybrid loan i.e. First one year- the loan will be in the form of Cash credit- so that the SHG member will have the flexibility of paying into the loan account when they have a surplus or only to pay the interest and they

can take out money when they need. This will enable them to manage liquidity better. In the second and third year, the loan will be treated as a term loan and the SHG members will repay the loan in 24 monthly instalments as we assume that at the end of one year, we can be sure that their livelihoods would have been fully reconstructed by that time.

The need for the hour is more on designing a flexible loan product by banks like COVID-Hybrid loan (Cash credit cum term loan). I invite the suggestions to this idea.  Bankers can give a thought over this idea.