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India's NBFC body urges government to create liquidity facility for priority sector lending

The Finance Industry Development Council (FIDC), representing non-banking finance companies (NBFCs) in India, has requested the government to establish a liquidity facility specifically for priority sector lending. This appeal comes in light of the challenges NBFCs face in accessing funds, particularly after the liquidity crisis triggered by the IL&FS default in 2018. The FIDC highlighted that while banks have access to a special liquidity facility for priority sector lending, NBFCs do not, which hampers their ability to lend to sectors like agriculture, small businesses, and housing for the economically weaker sections. The council proposed that this facility could be managed by the Small Industries Development Bank of India (SIDBI) or the National Bank for Agriculture and Rural Development (NABARD), and suggested that the government could fund it through the Long Term Irrigation Fund or the Rural Infrastructure Development Fund. This initiative aims to enhance liquidity for NBFCs, thereby supporting broader economic growth and financial inclusion.

Read the Full Reuters Article at:
[ https://www.reuters.com/world/india/indias-nbfc-body-urges-government-create-liquidity-facility-priority-sector-2025-01-02/ ]