Hindustan Times ST (Mumbai) - HT Navi Mumbai Live
Covid-hit sectors get liquidity boost
A liquidity window of ₹15,000 crore has been created for hotels, parlours, etc.
MUMBAI: The Reserve Bank of India (RBI) on Friday unveiled a ₹15,000 crore liquidity window to support businesses such as restaurants, travel agencies and beauty salons that are bearing the brunt of the pandemic.
Under the scheme, commercial banks can offer fresh lending support to hotels and restaurants; tourism sector comprising travel agents, tour operators, adventure and heritage facilities, aviation ancillary services such as ground handling and supply chain, and others such as private bus operators, car repair services, rent-acar service providers, event organizers, spa clinics and beauty parlours and salons.
“In order to mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors, a separate liquidity window of ₹15,000 crore is being opened till March 31 2022 with tenors of up to three years at the repo rate,” said RBI governor Shaktikanta Das.
Banks that offer such loans will be incentivised by being allowed to park excess liquidity, equivalent to such loan books, under the reverse repo window, at 3.75% or 40 basis points higher than the prevailing reverse repo rate.
The measure will be a relief to small businesses that have been hit the most by the second wave of the pandemic. While it is not clear if banks would like to lend to these sectors, given their higher risk profiles, those that do will be able to avail of the central bank’s incentive.
Experts meanwhile cautioned that the success of the programme will depend on how banks perceive the risk as compared to the higher reverse repo gains.
“A more equitable distribution of credit is likely to be contingent on whether the assessment of risks is in line with the markup over reverse repo provided by the RBI to banks. Therefore, some form of credit guarantee is perhaps required for de-risking the system,” said Abheek Barua, chief economist, HDFC Bank.
Contact-intensive sectors have suffered the biggest blow as people stayed indoors due to fears of getting infected with the coronavirus that has so far claimed 340,702 lives in India.
“The contact-intensive sector, particularly sub-sectors such as tourism, aviation and hospitality has been one of the hardest hit, and we believe that an easier access to funds will provide a much required help during these times,” said Nishant Pitti, chief executive and co-founder of EaseMyTrip.
The RBI’s latest step follows close on the heels of its announcement of an on-tap liquidity window of ₹50,000 crore to support airlines and healthcare infrastructure.
The government recently expanded the ambit of the existing Emergency Credit Line Guarantee Scheme (ECLGS) or the sovereign-backed lending programme to include hospitals. This scheme, as bankers said, has about ₹45,000 crore left to be utilized till the corpus of ₹3 lakh crore is exhausted.
The RBI on Friday also announced further support to micro, small and medium enterprises (MSMEs), particularly smaller MSMEs and other businesses through a special liquidity facility of ₹16,000 crore to SIDBI for on-lending or refinancing. Meanwhile, the RBI also enhanced the exposure limit to avail the new debt recast scheme for small businesses and individual business loans to ₹50 crore from ₹25 crore earlier.
Under the scheme, banks can provide fresh lending support to hotels and restaurants, tourism and supply chain and others such as private bus operators, car services, event organizers, spas, parlours and saloons.