In an unscheduled meeting, the Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday announced a slew of measures to help businesses, vulnerable borrowers and the financial services industry tide over for the impact of the new surge in Covid-19 cases.
The special Rs 50,000 crore term liquidity facility for banks to create a Covid loan book will be three years tenor and available at the repo rate. This facility will be available to Banks up to March 31, 2022.
Banks’ creating Covid loan book by lending to entities such as vaccine manufacturers, importers of life-saving equipment, hospitals and clinics will be incentivised by giving such lending the priority sector lending (PSL) tag.
Further, they will also be allowed to park an amount equivalent to the amount deployed in the aforementioned activities in the reverse repo window and earn 40 basis points higher interest rate than the current reverse repo rate of 3.35 per cent.
Small Finance Banks can tap a special Rs 10,000 crore long-term repo operation of three years tenor to on-lend to MSE up to Rs 10 lakh per MSE. This facility will be available up to October 31, 2021.
Further, SFBs loans to micro-finance institutions (with asset size of up to Rs 500 crroe) will be recognised as priority sector lending. This move is aimed at enhancing the flow of credit to MFIs.
RBI has brought in a resolution framework 2.0 for vulnerable borrowers — individuals, small businesses and MSMEs. Borrowers with exposure up to Rs 25 crore who didn’t avail earlier facilities and where loans are standard as on March 31, 2021 will be eligible for restructuring in the second round, Das said. The restructuring under the proposed framework can be invoked up to September 30, 2021 and banks have to implement it within 90 days of invocation.
Lenders can review the working capital limits of small businesses and MSMEs as a one-time measure. Those who availed earlier window of restructuring can be given additional two years of moratorium, he said.
In order to incentivise new credit flow to the micro, small, and medium enterprise (MSME) borrowers, Banks will be allowed to deduct credit disbursed to ‘New MSME borrowers’ from their net demand and time liabilities (NDTL) for calculation of cash reserve ratio (CRR) up to December 31, 2021. This exemption will be available for exposures up to Rs 25 lakh per borrower.
The governor also announced that the second purchase of government securities through its new secondary market bond acquisition program will be conducted on May 20 for a total amount of Rs 35,000 crore. On the impact of the second covid wave, Das said that while lead indicators suggested that the damage to businesses was minimal, it would continue to monitor the on-ground developments.
