In an unscheduled address today, RBI Governor Shaktikanta Das outlined various new range of measures to counter the pandemic. The governor announced an on-tap liquidity facility of INR 50,000 crore to ease access to healthcare services for all stakeholders in the COVID fight.
Under this, banks will be allowed to give fresh lending support to vaccine makers, manufacturers, logistics firms, etc. Banks are being incentivized to sanction these loans under priority sector classifications, Das added.
The RBI will also allow states to remain in overdraft for a maximum of 50 days. The limit was 36 days earlier. Besides, the number of consecutive overdraft days will go up to three weeks from two weeks earlier.
Highlights Of RBI Governor Shaktikanta Das’ Speech:
Liquidity facility of ₹ 50,000 crore to ease access of new funds to Emergency Medical Services
The banks can lend to hospitals, oxygen suppliers and vaccine importers by March 31, 2022
KYC compliance is being rationalized; limited KYC can now be used till December 1, 2021
Perspective of industry leaders on RBI Governor’s announcement:
Harsh Vardhan Patodia, President CREDAI
The announcements made by the RBI Governor today reflect that the Central Bank and Government are well aware of the impact of the second wave of the pandemic, shall proactively take measures to counter the economic fallout and take necessary steps in order to revive the economy.
The Rs 50,000 Cr term liquidity facility to “Ease Access to Emergency Health Services” will come as a big relief to healthcare service providers, equipment manufacturers and patients alike. The Credit to MSME and Resolution Framework 2.0 for COVID related stress assets will provide a lifeline to many struggling individuals, entrepreneurs and enterprises.
CREDAI urges and expects that similar measures which shall address concerns of large businesses and labour-intensive sectors like Real Estate will be announced in days to come.
We strongly believe that measures that make accounts classified as SMA 1 and SMA 2 also eligible for restructuring and interest moratorium coupled with additional liquidity under ECLGS 3.0 passed onto real estate projects will kick-start the engines of economy and job creation which are most important to offset the effects of the second wave.
Also, it is high time that the Government considers reclassification of SMA across businesses as this would ease liquidity pressure on NBFCs and Banks.
The aftereffect of the second wave will last for a much longer period because of the exponentially large number of infections and deaths and the true impact is yet to be assessed. Hence, proactive measures, much larger than those announced during the first wave of the pandemic last year, are the need of the hour.
Dr. Rashmi Saluja, Executive Chairperson, Religare Enterprises Ltd
The series of measures announced by the Reserve Bank of India will surely help mitigate the financial distress triggered by the second wave of COVID.
The central bank has shown lot of foresight by announcing flow of unhindered liquidity to the healthcare sector in order to boost production of vaccine, Covid related medicines and ramp up oxygen supplies.
That this special lending window of Rs 50,000 crore has been classified under priority sector lending will ensure steady flow of loans to the healthcare sector that is at the forefront of India’s valiant battle against the virus. In a bid to further encourage to lend to healthcare companies, RBI has also given incentive to banks.
The decision to offer restructuring to borrowers including MSMEs with aggregate exposure of upto Rs 25 crore is also a welcome move since small entrepreneurs and individuals are the most vulnerable segments.
Aashit Shah, Partner, J Sagar Associates
The announcements made by RBI today will benefit the MSMEs and small businesses who have been adversely impacted by the second wave of the pandemic. They will also provide much needed liquidity to the emergency healthcare sector to battle the proliferating spread of the virus.
A new term liquidity facility for healthcare sector at the repo rate will aid in ramping up covid related healthcare infrastructure and production and supply of essential healthcare products such as vaccines, oxygen and ventilators. It will also benefit patients burdened by unaffordable covid related medical bills.
The RBI has incentivised banks to offer these facilities by including them within the PSL targets of banks, and also permitting them to deposit the surplus liquidity up to an amount equal to their “Covid Loan” book with RBI at a rate which is 40 basis points higher than the normal reverse repo rate.
This will ensure that banks accelerate the provision of liquidity for emergency healthcare services so that India is better equipped financially to deal with the pandemic. Further, additional restructuring guidelines for to MSMEs, small businesses and individuals will assist them tide over the uncertainties caused due to the second wave.
These guidelines as well as the recently introduced pre-arranged insolvency resolution process will enable MSMEs to restructure their debts without the looming fear of losing or liquidating their businesses.