New Delhi: The Reserve Bank of India on Wednesday announced a term liquidity facility of Rs 50,000 crore for ramping up COVID-related healthcare infrastructure and services till March 2022. The facility was announced by RBI Governor Shaktikanta Das on May 5, to ease liquidity crunch faced by all stakeholders involved in the fight against the second wave and alleviating any constraint from the financing side.
“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,” said Shaktikanta Das.
The scheme will allow banks to provide fresh lending support to a wide range of entities including vaccine manufactures; 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.
According to the RBI website, the banks will be incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending up to March 31, 2022. These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier.
Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI. Banks are expected to create a COVID loan book under the scheme. By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate.
“Special long term repo operations for small finance banks to provide further support to micro, small & other unorganized sector entities,3-yr repo operations of Rs. 10,000 crore at repo rate, for fresh lending up to Rs 10 lakh per borrower;facility up to 31 October 2021,” RBI governor added.
Small finance banks (SFBs) have been playing a prominent role by acting as a conduit for last-mile supply of credit to individuals and small businesses. RBI added that to provide further support to small business units, micro and small industries, and other unorganised sector entities, 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.
“In view of fresh challenges, Small Finance Banks are now permitted to regard fresh on-lending to MFIs with asset size up to Rs 500 crore, as priority sector lending, facility available up to 31 March, 2022,” Das said on Wednesday.
RBI maintains that a normal monsoon will help ease inflationary pressures in the fast-moving consumer goods especially in the primary sector. The food prices are likely to taper while exports and imports are expected to grow. “Normal monsoon should help contain food price pressures, especially in cereals and pulses. Merchandise imports and exports continue to witness robust growth performance, even in April 2021. Foreign exchange reserves give us confidence to deal with global spillovers,” added Das.
“But even at this time, in run-up to next MPC (Monetary Policy Committee) when our teams are analysing various incoming data, we don’t expect any broad deviation from projections made in our April MPC but you’ll have to wait for MPC statement due in June 1st week,” he explained.
However, he reasoned that even there is no broad deviation from the previous projections for the Indian economy, people will have to wait till June’s first week for an RBI statement. The RBI has projected the GDP growth at 10.5 per cent in financial year 2021-22, meanwhile inflation is projected to reach 5 per cent in fourth quarter of FY 2021, inflation in the first half of FY 2022 is projected at 5.2 per cent which will go down to 4.4 per cent in the third quarter and rise to 5.1 per cent in the last quarter (Q4) of FY 2022.