The RBI also announced a targeted on-tap liquidity window of Rs 50,000 crore to set up COVID-19-related healthcare infrastructure.

RBI Governor Shaktikanta Das giving his speech sitting in front of the RBI logo
Money Economy Wednesday, May 05, 2021 - 12:44

Reserve Bank of India Governor Shaktikanta Das, in an unscheduled speech on Wednesday, announced the measures undertaken by the central bank as part of “a calibrated and comprehensive strategy against the pandemic”.

The RBI announced a targeted on-tap liquidity window of Rs 50,000 crore to set up COVID-19-related healthcare infra. Furthermore, the Reserve Bank will allow restructuring for borrowers with exposure of Rs 25 crore, who have not been beneficiaries of RBI's previous loan restructuring schemes.

In terms of outlook, Das said the global economy is showing incipient signs of recovery, but activity remains uneven across countries and sectors. “The outlook is highly uncertain and clouded with downside risks,” he said. 

He added that aggregate demand conditions, especially in contact-intensive services, are likely to see a temporary dip. However, with businesses and households learning to adapt, he said the dent in aggregate demand is expected to be moderate in comparison to a year ago.

Das also announced relaxation in overdraft facility for state governments to enable them to better manage their fiscal situation in terms of their cash flows and market borrowing.

Now the maximum number of days of overdraft, that are only in a quarter, have been increased from 36 to 50 days.

Term liquidity facility 

In terms of additional measures taken to fight the pandemic, the RBI said alleviating any constraint from the financing side for all stakeholders requires a comprehensive targeted policy response. 

“Small businesses and financial entities at the grassroot level are bearing the biggest brunt of the second wave of infections,” he said.

He announced a term liquidity facility of Rs 50,000 crore to ease access to emergency health services. This, he said, was to boost liquidity for ramping up of COVID-19 related healthcare infrastructure. 

“Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufacturers; importers/suppliers of vaccines and priority medical devices; hospitals/dispensaries; pathology labs; manufactures and suppliers of oxygen and ventilators; importers of vaccines and COVID related drugs; logistics firms and also patients for treatment,” the RBI governor said. 

He added that banks are being incentivised for quick delivery of credit under the scheme, with the priority sector classification being extended till March 31, 2022. These loans will be classified so either till repayment or maturity, whichever is earlier. 

Banks are expected to create a COVID-19 loan book, he added.

For individuals, small businesses and MSMEs 

The bank also announced a restructuring resolution framework 2.0.

With regard to restructuring he said, borrowers that are individuals and micro, small and medium enterprises (MSMEs) having an aggregate exposure of up to Rs 25 crore would be considered for the new scheme.

Under this, restructuring can be invoked up to September 30 and will have to be implemented within 90 days after invocation. For those who did avail restructuring under the previous framework, where the resolution plan permitted moratorium of less than two years, the central bank allowed lending institutions to use this window of upto September 30 to modify such plans to the extent of either increasing the period of moratorium or extending the residual tenor up to a total of 2 years.

“In respect of small businesses and MSMEs restructured earlier, lending institutions are also being permitted as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc,” it said.

RBI has also introduced a Rs 10,000-crore special long-term repo operation for small finance banks. Under this, loans up to Rs 10 lakh to MSMEs will be considered as priority sector lending, Das said.

KYC

RBI also extended the scope to video KYC known as video-based customer identification process as part of rationalisation of some components of the know-your-customer (KYC) norms for enhancing customer convenience.

Further, keeping in view the COVID-19 related restrictions in various parts of the country, RBI regulated entities have been asked not to impose any punitive restriction on operation of customer accounts for customer accounts till December 31, 2021 where periodic KYC updating is new or pending, unless warranted, due to any other reason.

Government securities

RBI said the second purchase of government securities worth Rs 35,000 crore under the G-sec Acquisition Programme (G-SAP 1.0) will be done on May 20 for an orderly evolution of the yield curve as a fresh COVID-19 wave threatens to hit the economy.

The first purchase of Rs 25,000 crore last month received enthusiastic response from the market, Reserve Bank of India (RBI) Governor Shaktikanta Das said while announcing slew of measures to provide relief to various segments of the economy hit by the second wave of the pandemic.

RBI will do the second purchase of government securities (G-secs) aggregating Rs 35,000 crore in two weeks, he said.

To provide clarity on its bond-buying programme through open market operations (OMO), Das had announced Rs 1 lakh crore target for the first quarter under the new instrument called G-SAP 1.0.

On the rate of price rise, he said, food and fuel inflation have pushed core inflation. Expected normal monsoon forecast should help contain food price inflation, he added.

With PTI inputs

Become a TNM Member for just Rs 999!
You can also support us with a one-time payment.