Non-banking finance companies (NBFCs) had some reasons to smile on Friday as the RBI nudged banks to invest in debt instruments issued by these entities and microfinance institutions (MFIs).

The central bank also eased the rules for loans taken from non-banks for commercial real estate. Further, the RBI stepped in with indirect liquidity support for the other segments by announcing that it will provide special refinance facility worth Rs 50,000 crore to Nabard, Sidbi and the National Housing Bank.

While proposing a targeted lending for NBFCs and MFIs, the central bank announced long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore in tranches. The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs,.

At least 50 per cent of this amount should go to small and medium sized non-banks and MFIs. Further, these investments will have to be made within one month of the availment of liquidity from the RBI.

Under the TLTRO auction, banks raise funds at the policy repo rate. In March too, the RBI had announced TLTRO totalling up to Rs one lakh crore. However, the complaint has been that banks have invested the amount raised only in AAA rated papers of leading corporates.

“Many of our concerns have been addressed,” said Mahesh Thakker, director general of the Finance Industry Development Council.

While welcoming the extension in NBFC loans for delayed commercial real estate projects, Credai chairman Jaxay Shah said the sector was looking at an economic package.