The Reserve Bank of India's [Get Quote] special window for banks to on-lend to mutual fund houses and the non-banking finance companies has received a lukewarm response from lenders.

Banks have largely kept away from RBI's special, fixed-rate, term repo under the 14-day Liquidity Adjustment Facility, if the bids received in the last two days are any indication.

Since November 3, the day the central bank's special window was opened, bids worth Rs 2,775 crore (Rs 27.75 billion) were placed at the auctions against the total outstanding amount of Rs 60,000 crore (Rs 600 billion) at the fixed rate of 7.5 per cent.

"It's a commercial decision of banks to lend money to NBFCs. It implies that banks are still cautious about lending to NBFCs and they might take some more time to start lending normally to us," said an NBFC chief.

On the other hand, bankers said it was a lack of interest on the part of mutual funds and NBFCs as they were yet to approach them for money.

"Banks are not being approached by NBFCs at all and, as far as MFs are concerned, we have feedback that they are seeing inflows in terms of new subscriptions," said a treasury head of a mid-size public sector bank.

On November 1, the RBI had announced it would conduct the special, fixed-rate term repo under LAF everyday until further notice up to a cumulative amount of Rs 60,000 crore (Rs 600 billion) to the extent of up to 1.5 per cent of the banks' net demand and time liabilities for enabling them to meet the fund requirements of MFs and NBFCs.

However, some NBFCs feel that banks are now preoccupied with cutting interest rates and it is only a matter of time that will start normal lending to the big entities.

"The liquidity condition is showing signs of improvement. It is only  a couple of days since the window has been operational and I believe that, in course of time, banks will definitely start lending to NBFCs that are well capitalised and have a proven track record," said Shriram Transport Finance Company [Get Quote] Managing Director R Sridhar.