RBI relief to small borrowers, loans to vaccine makers
The regulator opens liquidity window for vaccine makers, hospitals, others
MUMBAI: The Reserve Bank of India on Wednesday took a series of liquidity-boosting and loan-relief measures to aid broad swathes of the economy walloped by the second wave of the Covid-19 pandemic.
Governor Shaktikanta Das said that the central bank will make available an on-tap liquidity window of ₹50,000 crore, with a tenor of up to three years, under which banks can provide fresh lending support to a wide range of entities, including vaccine makers, importers of vaccines, Covid-related drugs, hospitals, labs, manufacturers and suppliers of oxygen and ventilators, logistics firms and also to patients for treatment. This facility, which will be offered at the repo rate, will be available till March 31, 2022.
The steps are likely to help the stressed health care industry expand facilities to treat more Covid-19 patients. With thousands of sick people seeking treatment, hospitals are overwhelmed and are running out of medical-grade oxygen. Vaccines and key medicines are in short supply, as are lifesaving medical equipment.
The RBI also allowed the restructuring of loans to retail
The devastating speed with which the virus affects different regions has to be matched by swift-footed and wide-ranging actions SHAKTIKANTA DAS, RBI governor
borrowers and small businesses up to ₹25 crore without being classified as non-performing assets. Restructuring under the proposed framework may be invoked up to September 30.
Under the special liquidity window, RBI said all loans given will be classified as priority sector loans till repayment or maturity. Bank can disburse these loans to borrowers directly or through intermediaries regulated by the RBI.
Analysts said that direct support to the identified sectors will help generate total output demand of roughly ₹80,000 crore.
The Reserve Bank of India (RBI) on Wednesday took a series of liquidity-boosting and loan-relief measures to aid broad swathes of the economy walloped by the second wave of the covid-19 pandemic.
Governor Shaktikanta Das said the RBI will make available an on-tap liquidity window of ₹50,000 crore, with a tenor of up to three years, under which banks can provide fresh lending support to a wide range of entities, including vaccine makers, importers of vaccines, covid-related drugs and priority medical devices, hospitals, pathology labs, manufacturers and suppliers of oxygen and ventilators, logistics firms and also to patients for treatment. This facility, which will be offered at the repo rate, will be available till March 31, 2022.
The steps are likely to help the stressed healthcare industry expand facilities to treat more patients amid the rampaging second wave. With thousands of sick people seeking treatment, hospitals are overwhelmed and are running out of medicalgrade oxygen. Vaccines and key medicines are in short supply, as are lifesaving medical equipment such as ventilators and oxygen concentrators.
The RBI also allowed the restructuring of loans to retail borrowers and small businesses up to ₹25 crore without being classified as non-performing assets. Restructuring under the proposed framework may be invoked up to September 30 and will have to be implemented within 90 days after the invocation, it said.
Under the special liquidity window, the RBI said all loans given will be classified as priority sector loans till repayment or maturity. Bank can disburse these loans to borrowers directly or through intermediaries regulated by the RBI. Das said banks are expected to create a covid loan book under the scheme. By way of an incentive, banks can park their surplus liquidity up to the size of the covid loan book with the RBI under the reverse repo window at 40 basis points higher than the reverse repo rate. For instance, if a bank has lent ₹500, it can earn 3.75% on the liquidity parked in the reverse repo window.
Analysts said direct support to the identified sectors will help generate total output demand of roughly ₹80,000 crore, as the macro impact of the scheme can be gauged from the fact that a ₹50,000 crore liquidity boost is roughly 9% of the total health expenditure of ₹6 lakh crore in 2019-20.
Das also announced the second purchase of government securities worth ₹35,000 crore under the government securities acquisition programme (G-SAP) on May 20. The RBI had announced the ₹1 lakh crore G-SAP 1.0 in the monetary policy in April. Under this scheme, the first tranche of ₹25,000 crore was conducted on April 15.
“G-SAP has engendered a softening bias in G-Sec yields, which has continued since then,” Das said. “With system liquidity assured, the RBI is now focusing on increasingly channelising its liquidity operations to support growth impulses, especially at the grass-root level,” he added.
Small finance banks (SFBs) are another segment that received special attention. The central bank has offered liquidity support of ₹10,000 crore under a special three year longterm repo operation (SLTRO) at repo rate. These banks can on-lend the money taken under this window up to ₹10 lakh per borrower. This facility will be available till October 31. The RBI has further incentivised SFBs by allowing loans to microfinance institutions (MFIs) be classified under priority sector.
“In view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to smaller MFIs (with asset size of up to ₹500 crore) for on-lending to individual borrowers as priority sector lending. This facility will be available up to March 31, 2022,” Das said.
“Some of the targeted lending programmes are meant to give liquidity to specific sectors and incentivize banks to lend in the direction. Banks could have been conservative in terms of lending to small borrowers in these times. By classifying loans to smaller NBFC-MFIs as a priority sector, RBI has opened liquidity option for them and risk incentive to banks to lend to these entities and indirectly to their borrowers,” said Rajeev Yadav, chief executive officer, Fincare Small Finance Bank.
SHAKTIKANTA DAS } RBI GOVERNOR
Small businesses and financial entities at the grassroot level are bearing the biggest brunt of second wave.