National Housing Bank: Rs 10,000 crore Special Refinance Facility launched

The National Housing Bank recently launched the “Special Refinance Facility”, 2021. Rs 10,00 crores has been allocated to this facility.

Special Refinance Facility, 2021

  • The main objective of the facility is to provide short term refinance support to the housing finance companies and other eligible Primary Lending Institutions.
  • The facility will aid in meeting the short-term liquidity requirement in the Public Lending Institutions.

Background

The National Housing Bank has launched the initiative with the support from Reserve Bank of India (RBI). The RBI had recently announced under its Monetary Policy Review that Special Liquidity Facility-2 of Rs 10,000 crores will be allocated to National Housing Board for one year. This was done to support the housing sector. The NHB has now launched the refinancing facility based on this allocation made by the Reserve Bank.

Refinance Support in recent times

  • Between May 2020 and August 2020, the National Housing Board provided refinance support of Rs 14,000 crores under the Additional Special Refinance Facility and Special Refinance Facility. It was under another short term liquidity support provided by RBI under Atma Nirbhar Bharat Abhiyan.
  • In May 2020, the RBI had announced refinance facility of Rs 15,000 crore for SIDBI.
  • In April 2020, RBI announced refinance facility of Rs 25,000 crores for NABARD. This was to refinance regional rural banks, micro finance institutions and cooperative banks.

Legality of Special Refinance Facility

The Special Refinance Facility is provided by the Reserve Bank of India under Section 17 (3) of Reserve Bank of India Act, 1934. Basically, the Section 17 defines how the apex bank shall conduct its business.

Section 17 of RBI Act, 1934

The Section allows the RBI to perform the following functions:

  • The Apex Bank shall accept deposit from the state and central governments without interest.
  • It can discount and purchase bills of exchange from commercial banks.
  • It can buy and sell foreign exchanges.
  • It can provide loans to state and central financial institutions.
  • It can buy and sell government securities.
  • It can deal with repo and reverse repo rates.

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