RBI Governor Shaktikanta Das unveiled liquidity support measures amid rising COVID-19 cases in India.

Loan restructuring scheme

In a bid to provide succour from the scourge of COVID-19 pandemic, the Reserve Bank came out with Resolution Framework 2.0 under which individuals and small businesses having exposure up to Rs 25 crore can opt for loan restructuring if they had not availed the earlier scheme.  

This is the second restructuring scheme announced by the central bank in less than one year, with the first unveiled in August last year when the first COVID-19 wave had battered the Indian economy.

In case of those who had availed the loan restructuring under the earlier scheme, RBI permitted the banks and lending institutions to modify the plans and increase the period of moratorium.  

This is a one-time loan time loan restructuring scheme under which the loan would remain standard despite recast and banks would not have to make additional provision in such cases.  

Second tranche under G-SAP for Rs 35,000 crore

Domestic financial conditions remain easy on abundant and surplus system liquidity. The average daily net liquidity absorption under the liquidity adjustment facility (LAF) was at Rs 5.8 lakh crore in April 2021. 

The first auction under Government Securities Acquisition Programme (G-SAP) 1.0 conducted on April 15, 2021 for a notified amount of Rs 25,000 crore elicited an enthusiastic response. G-SAP has engendered a softening bias in government securities (G-sec) yields which has continued since then. 

Given this positive response from the market, it has been decided that the second purchase of government securities for an aggregate amount of Rs 35,000 crore under G-SAP 1.0 will be conducted on May 20, 2021.

With system liquidity assured, the RBI is now focusing on increasingly channelising its liquidity operations to support growth impulses, especially at the grassroot level.

On-tap liquidity window of Rs 50,000 crore for health care infra

To boost provision of immediate liquidity for ramping up COVID-19 related health care 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

• Manufactures and suppliers of oxygen and ventilators

• Importers of vaccines and COVID-19 related drugs

• Logistics firms

• Patients for treatment.

Banks are being 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. 

SLTRO for Small Finance Banks (SFBs)

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.

To provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic, 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.

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