Separate liquidity window for transport, hotels and tourism

■ „Struggling businesses can now get up to `50 cr

To address the adverse impact of the second wave of the Covid 19 pandemic, the Reserve Bank of India governor Shaktikanta Das on Friday announced an on-tap additional liquidity window for Rs 15,000 crore for contact-intensive sectors including hotels and restaurants, transport, tourism, event management companies and beauty salons.

Besides it also raised the aggregate debt eligibility threshold to struggling businesses to Rs 50 crore from Rs 25 crore. Under the on-tap liquidity window, banks can provide loans of three-year tenures to “certain contact-intensive sectors i.e., hotels and restaurants; tourism – travel agents, tour operators and adventure/heritage facilities; aviation ancillary services – ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/ conference organisers, spa clinics, and beauty parlours/saloons.

Banks are expected to create a separate Covid loan book under the scheme,” the RBI said. Banks are to be incentivised by being permitted to park their surplus liquidity up to the size of their loan book under the scheme, with the reverse repo window at a rate 40 basis points higher than the reverse repo rate.

“Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above will also be eligible for this incentive,” said the RBI.

Heeding to the industry demand, the RBI also expanded the scope of borrowers allowed to use its restructuring programme, by raising the maximum aggregate exposure threshold from Rs 25 crore to Rs 50 crore for smaller businesses and loans to individuals for business purposes.

“Crisil rates about 6,800 mid-sized companies (excluding financial sector entities). Of these around 4,700 are small and medium enterprises (SMEs), having bank loan exposure of up to Rs 50 crore, and are standard accounts as on March 31, 2021, making these eligible to avail of the restructuring. As per the earlier aggregate debt threshold of Rs 25 crore, only half of the Crisilrated mid-sized companies were eligible. But now, with the revised threshold, almost two-thirds have come under the ambit of the restructuring scheme,” said Subodh Rai, chief ratings officer, CrisilL Ratings Ltd.

The RBI also provided Sidbi with a special liquidity facility of Rs 16,000 crore available at repo rate for one year for financial support to MSMEs.

“In order to meet MSMEs’ short- and medium-term credit needs to kick start the investment cycle with additional focus on smaller MSMEs and businesses including those in credit deficient and aspirational districts, it has been decided to provide a further special liquidity facility of Rs 16,000 crore to Sidbi,” said the RBI.

Meanwhile, the RBI monetary policy committee (MPC) kept the repo rate unchanged in the second bi-monthly policy meeting for the financial year 2021-22. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.

On the liquidity front, another GSAP operation under GSAP 1.0 will be conducted in June amounting to Rs 40,000 crore and GSAP 2.0 will be undertaken in 2Q worth Rs 1.2 lakh crore to support the liquidity.