Liquidity Facility of Rs.50,000cr to ramp up COVID-related health infrastructure and services.
The Reserve Bank of India’s (RBI) assertion to “stand in battle readiness” and take “unconventional” measures to deal with the raging second wave of coronavirus, along with a slew of reliefs to the small borrowers, including individuals, are important confident building announcements by Governor Shaktikanta Das, said the ASSOCHAM said.
The “targeted policy response and easy credit promised to the entire healthcare value chain, in the government and private sector including the vaccine manufacturers are the most apt measures at this point of time”, the Chamber’s Secretary General Deepak Sood said in comments on RBI’s latest support for the industry announced on 5 May 2021.
“Very importantly, the RBI has mentioned the common man who is facing the brunt of this deadly virus and deserves easy finance options for medical expenses.”
The RBI has most correctly recognised how small businesses and financial entities at the grassroots are bearing the most considerable burden of the pandemic and has thus unveiled measures to help them.
The measures include restructuring loans with exposure up to Rs.25 crore, treating lending to micro-financial institutions by small finance banks for further on lending to individual borrowers as a priority sector, and providing much-needed relief to sectors that are under maximum stress.
“Alleviating any constraint from the financing side for all stakeholders – government, hospitals and dispensaries, pharmacies, vaccine and medicine manufacturers and importers, medical oxygen manufacturers/suppliers, private operators engaged in the critical healthcare supply chain, and above all the common man who may be facing sudden spike in health expenditure – 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,” said Das.
The measures form the first part of a calibrated and comprehensive strategy against the pandemic, said the Governor.
Term Liquidity Facility of Rs.50,000 crore with tenure of up to 3 years, at repo rate, to ease access to emergency health services, for ramping up COVID-related health infrastructure & services. Banks can give fresh lending support to variety of stakeholders under this facility. This lending facility will be available up to 31 March 2022. Banks will be provided incentives to provide credit under this facility.
In order to provide further support to micro, small and other un-organized sector entities, 3-year repo operations of Rs.10,000 crore at repo rate, for fresh lending up to Rs.10 lakh per borrower; facility is available up to 31 October, 2021.
In view of fresh challenges, Small Finance Banks (SFBs) are now permitted to regard fresh on-lending to MFIs with asset size up to Rs.500 crore, as priority sector lending. This facility will be available up to 31 March, 2022.
To further incentivize inclusion of unbanked MSMEs into banking system, exemption provided in February 2021 wherein scheduled banks were allowed to deduct credit given to new MSME borrowers from Net Time & Demand Liabilities for calculation of CRR, is now extended to 31 December 2021.
Stress Resolution Framework 2.0 for Individuals, Small Businesses and MSMEs: Following set of measures have been announced to relieve stress faced by most vulnerable categories of borrowers – namely individuals, borrowers and MSMEs.
a) Individuals, borrowers and MSMEs with aggregate exposure up to Rs.25 crore, who have not availed restructuring under any previous frameworks, who were classified as standard on 31 March 2021, will be eligible to be considered under Resolution Framework 2.0. Restructuring under new framework can be invoked till 30 September 2021 and will have to be implemented within 90 days after invocation.
b) For individuals and small businesses who have availed restructuring of loans under Resolution Framework 1.0, where moratorium of less than two years was permitted, lending institutions can now increase the period and/or extend residual tenure up to a total period of two years.
c) In respect of small businesses and MSMEs restructured earlier, lending institutions are now permitted to review working capital sanction limits, as a one-time measure.
Steps being proposed include: a) Extending scope to video KYC for new customer categories such as proprietorship firms, b) Conversion of limited KYC accounts to fully KYC compliant accounts, c) Introduction of more customer-friendly options in KYC updating and d) enabling the use of KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP and submission of electronic documents as identify proof
Floating Provisions and Countercyclical Provisioning Buffer: Banks can now use 100% of floating provisions held by them, as on December 31, 2020, for making specific provisions for NPAs; such utilization is permitted up to 31 March 2022.
Relaxation of overdraft facility for states: Maximum number of days of overdraft in a quarter for state governments has been increased from 36 to 50 days. The number of consecutive days of OD has been increased from 14 to 21 days; facility available up to 30 September 2021.
Das observed that India has mounted a valiant defence to ramp up vaccines and medical support while fighting a ferocious rise in infections and mortalities in the second wave, after having flattened infections. Shoring up livelihoods and restoring normalcy in access to workplaces, education and incomes becomes an imperative in such a situation, he pointed out.
In order to match the devastating speed of the virus, swift, wide-ranging, sequenced and well-timed actions which reach out to various sections, including the most vulnerable has to be taken. In this connection, he lauded the contribution of health care workers, law enforcement and other frontline workers who have been battling the pandemic selflessly.
RBI will closely monitor the impact of second wave of COVID-19 on macroeconomic and financial conditions, he said. “We will work closely with the Government to alleviate extreme travails being undergone by citizens”, he stated in course of his address.
The second wave is not insurmountable, the Governor stressed.
Stating the immediate objective, which is to preserve human life and restore livelihoods through all means possible, the Governor stated that RBI is battle-ready to ensure financial conditions remain congenial and markets continue to work efficiently.
“In this, the RBI is committed to go unconventional and devise new responses as per demand,” said Das. #banking #industries #economy #investment #debts /fiinews.com
