Covid-19: RBI Proposes Term Liquidity Facility Of Rs 50,000 Crore To Ease Access To Emergency Health Services
“Alleviating any constraint from the financing side for all stakeholders – government, hospitals and dispensaries, pharmacies, vaccine/medicine manufacturers/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,” said Das.
Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday announced a series of measures, including term liquidity facility of Rs 50,000 crore to ease access to emergency health services, to support the nation’s fight against the second wave of Covid-19 infections.
“Alleviating any constraint from the financing side for all stakeholders – government, hospitals and dispensaries, pharmacies, vaccine/medicine manufacturers/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,” said Das.
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“Small businesses and financial entities at the grassroot level are bearing the biggest brunt of the second wave of infections,” he added.
The RBI Governor said the measures form the first part of a calibrated and comprehensive strategy against the pandemic.
Term Liquidity Facility of Rs 50,000 crore to Ease Access to Emergency Health Services:
Term Liquidity Facility of Rs. 50,000 crore with tenure of up to three years, at repo rate, to ease access to emergency health services, for ramping up Covid-related health infrastructure and services. Banks can give fresh lending support to variety of stakeholders under this facility. This lending facility will be available up to March 31, 2022. Banks will be provided incentives to provide credit under this facility.
Special Long Term Repo Operations for Small Finance Banks:
In order to provide further support to micro, small and other unorganized 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.
Lending by Small Finance Banks (SFBs) to MFIs for on-lending to be classified as priority sector lending:
In view of fresh challenges, 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.
Credit flow to MSME Entrepreneurs:
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 and Demand Liabilities for calculation of CRR, is now extended to December 31, 2021.
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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 September 30, 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 2 years was permitted, lending institutions can now increase the period and/or extend residual tenure up to a total period of 2 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.
Rationalization of KYC norms for enhanced customer experience:
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 March 31, 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 September 30, 2021.
Quoting Father of The Nation Mahatma Gandhi “My faith is brightest in the midst of impenetrable darkness”, the RBI Governor 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.
He pointed out that shoring up livelihoods and restoring normalcy in access to workplaces, education and incomes becomes an imperative in such a situation.
Das further said the RBI will closely monitor the impact of second wave of COVID-19 on macroeconomic and financial conditions.
“We will work closely with the government to alleviate extreme travails being undergone by citizens,” he added.
Asserting the second wave is not insurmountable, the RBI Governor stated the apex bank is battle-ready to ensure financial conditions remain congenial and markets continue to work efficiently.
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