The Reserve Bank of India Governor Shaktikanta Das today announced a host of measures to address the problems being faced by borrowers as a result of the COVID-19 pandemic and to improve the liquidity in the system.

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Following were the announcements:

Bond purchases by RBI

The second round of purchase of government securities for an aggregate amount of Rs 35,000 crore under G-SAP 1.0 (Government Securities Acquisition Programme) will be conducted on May 20, 2021. This move should help keep bond yields in check, and as a consequence, lower the cost of borrowing for individuals and firms.

Liquidity for emergency health services

To boost the 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 this, banks can lend to 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.

These loans will continue to be classified under the priority sector till repayment or maturity.

COVID loan book

Banks are expected to create a COVID loan book for the abovementioned scheme. To encourage banks to avail of the scheme, they will be eligible to park surplus liquidity up to the size of the COVID loan book with the RBI under the reverse repo window at a rate that is 25 bps lower than the repo rate.

Liquidity for Small Finance Banks

RBI will conduct special three-year long-term repo operations (SLTRO) of Rs 10,000 crore at repo rate for Small Finance Banks, which can be lent up to Rs 10 lakh per borrower. This facility will be available till October 31, 2021.

Priority Sector Lending tag

Small Finance Banks (SFBs) can now classify fresh 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.

Credit to MSME entrepreneurs

Banks were recently 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). 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.

Loan restructuring for small businesses

Individual borrowers and small businesses having aggregate exposure of up to Rs 25 crore shall be eligible for having their loans restructured under a new resolution framework.

This will be applicable to borrowers who have not availed of restructuring under any of the earlier restructuring framework, and who were classified as ‘standard’ (loans) as of March 31, 2021.

For MSMEs which have availed of restructuring already, lenders have been permitted as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc.

KYC requirements

Video KYC known as V-CIP (video-based customer identification process) has been extended for new categories of customers such as proprietorship firms, authorised signatories and beneficial owners of Legal Entities and for periodic updation of KYC; For the customer accounts where periodic KYC updating is due/pending, no punitive restriction on operations of customer account(s) shall be imposed till December 31, 2021 unless warranted due to instructions of any regulator/enforcement agency/court of law..

Floating Provisions and Countercyclical Provisioning Buffer

Banks can utilize 100 per cent of floating provisions/counter-cyclical provisioning buffer held by them as of December 31, 2020 for making specific provisions for non-performing assets with prior approval of their boards. This can be done by March 31, 2022.

Relaxation in Overdraft (OD) facility for State Governments

To enable State Governments to better manage cash-flows and market borrowings, the maximum number of days of overdraft in a quarter has been 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.

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First Published:May 5, 2021 11:15 AM IST