RBI Announces Tap Liquidity Of Rs 50,000 Cr For COVID-19 Related Healthcare Infra Till March 2022

RBI Governor Shaktikanta Das on Wednesday made several key announcements including a term liquidity facility of Rs 50,000 crore for ramping up COVID-related healthcare infrastructure and services in the country.

The Reserve Bank of India Governor Shaktikanta Das on Wednesday announced a term liquidity facility of Rs 50,000 crore to ease access to emergency health services till March 31, 2022.

"To boost provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country, an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate is being opened till March 31, 2022. 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; manufacturers and suppliers of oxygen and ventilators; importers of vaccines and COVID related drugs; logistics firms and also patients for treatment," said Das.

The RBI will incentivize the banks to quickly deliver credit under the scheme by extending priority sector classification to such lending up to March 31, 2022. These loans will continue to be classified under the priority sector till repayment or maturity, whichever is earlier.

The RBI plans special long-term repo operations (SLTRO) for Small Finance Banks (SFBs) as they have played a prominent role by acting as a conduit for the last mile supply of credit to individuals' small businesses. "It has been decided to conduct special three-year long-term repo operations (SLTRO) of Rs 10,000 crore at repo rate for the SFBs, to be deployed for fresh lending of up to Rs 10 lakh per borrower. This facility will be available till October 31, 2021.

Given the pandemic's fresh challenges and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon new lending to smaller MFIs (with asset size of up to Rs 500 crore) for on-lending to individual borrowers as priority sector lending. This facility will be available up to March 31, 2022.

In a bid to incentivize credit flow to the micro, small, and medium enterprise (MSME) borrowers, in February 2021, Scheduled Commercial Banks were allowed to deduct credit disbursed to new MSME borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR).

"To further incentivize the inclusion of unbanked MSMEs into the banking system, this exemption currently available for exposures up to Rs 25 lakh and for credit disbursed up to the fortnight ending October 1, 2021, is being extended till December 31, 2021," said Das.

The Governor announced Resolution Framework 2.0 for COVID Related Stressed Assets of Individuals, Small Businesses, and MSMEs, which includes restructuring under the proposed framework, may be invoked up to September 30, 2021, implemented within 90 days after invocation.

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.

To enable the State Governments to manage better their fiscal situation regarding their cash-flows and market borrowings, the RBI allowed certain relaxations about availing of Overdraft (OD) facilities. "The maximum number of OD days in a quarter is being increased from 36 to 50 days and the number of consecutive days of OD from 14 to 21 days. This facility will be available up to September 30, 2021," said Mr. Das.