Liquidity in Lockdown: How Can India’s Small Finance Banks Manage?

The moratorium for borrowers enabled by the Reserve Bank of India in response to the economic disruption of the lockdown has created challenges all along the micro-lending value chain. 

This Advisory Note attempts to estimate the magnitude of the liquidity shortfall for small finance banks (SFBs) resulting from the current six-month moratorium.  It shows that investors and lenders will need to provide funds of the order of 3,700 crore ($500 million) per large SFB equivalent to 25-30 percent of the overall funds currently managed by each of them for such SFBs not just to survive but also to revive their businesses after the moratorium period.  This is important ultimately to facilitate the livelihoods of the low-income families they serve.

Access the latest version of this Note "Liquidity in Lockdown – Update 2: India’s SFBs & MFIs Coping With the Pandemic".