The Governor of the Reserve Bank of India (RBI), Mr Shaktikanta Das, addressed a sudden press conference and spoke about the major measures RBI is taking to fight against the second wave of COVID-19 that has surged in the country. He stated that the relief measures are much needed for businesses and enterprises facing a cash crunch during this time.
There is a need to enhance liquidity within the COVID-related healthcare infrastructure and services in the country. Hence, RBI is offering an on-tap liquidity window of Rs.50,000 crore with a loan tenure of up to three years at the repo rate will be offered. This facility is open until 31 March 2022.
Banks can provide lending support to entities, such as vaccine manufacturers, importers and suppliers of vaccine and priority medical devices, pathology labs, hospitals and dispensaries, manufacturers, suppliers of oxygen and ventilators, and others.
Das stated that banks are being incentivised for quick delivery of credit under the scheme by extending priority sector classification to such lending. This facility will be available until 31 March 2022. The classification will continue as a priority sector until repayment or maturity, whichever is earlier.
These loans directly or through intermediaries regulated by the RBI. Banks must create a COVID Loan Book under the scheme. By way of an additional incentive, such banks can park their surplus liquidity up to the size of COVID Loan Book with RBI under the reverse repo window at a rate of 25 basis points lower than the existing repo rate or 40 basis points higher than the reverse repo rate.
Next, Special Long-Term Repo Operations (SLTRO) facility will be offered to small finance banks (SFBs). SFBs are acting as a conduit by supplying credit facilities to individuals and small businesses. Special three-year long-term repo operations will be conducted for fresh lending worth Rs.10,000 crore at the repo rate for small finance banks. This facility will be available until 31 October 2021.
SFBs lending to Micro Finance Institutions (MFIs), with asset size of up to Rs.500 crore, will be classified as priority sector lending. This is to address the emergent liquidity position of the smaller MFIs. This facility will be available up to 31 March 2022.
To enhance the credit flow to Micro, Small, and Medium Enterprises (MSME) entrepreneurs, the scheduled commercial banks were allowed to deduct credit disbursed for new MSME borrowers from their Net Demand and Time Liabilities (NDTL) for calculation of CRR in February 2021.
To incentivise the inclusion of unbanked MSMEs into the banking system, this exemption will be made available for exposures of up to Rs 25 lakh and for credit disbursed up to fortnight ending 1 October 2021 is being extended until 31 December 2021.
Mr Das described the next set of measures that target individuals, small businesses, and MSMEs. These borrowers having aggregate exposure of up to Rs.25 crore, who have not availed restructuring under any of the earlier restructuring frameworks will be eligible for resolution 2.0. They can invoke restructuring under the proposed framework up to 30 September and should be implemented within 90 days after invocation.
In the case of individual borrowers and small businesses who have availed restructuring of their loans under resolution framework 1.0, where the resolution plan permitted a moratorium of fewer than two years, lending institutions have been permitted to use this window to modify such plans to the extent of increasing the period of the moratorium and/or extending residual tenure up to a total of two years.
Let us hope that the individuals, small businesses, and MSMEs use the relief measures offered by the RBI to the fullest extent.
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
