The facility of on-tap liquidity with tenors of up to three years at the repo rate will remain open till 31st March, 2022
Amid a spurt in coronavirus cases, the Reserve Bank of India (RBI) on Wednesday announced an on-tap liquidity window of Rs 50,000 crore for companies engaged in healthcare infrastructure and services.
The facility of on-tap liquidity with a tenure of up to three years at the repo rate will remain open till 31st March, 2022, Shaktikanta Das, Governor, RBI, said while announcing steps to deal with the impact of the second wave of coronavirus pandemic.
Under the scheme, banks may provide fresh lending support to a wide range of entities including vaccine manufacturers, importers/suppliers of vaccines and priority medical devices, hospitals and dispensaries, pathology labs, manufacturers and suppliers of oxygen and ventilators, importers of vaccines and COVID-related drugs, logistics firms and also patients for treatment.
The banks, Das said, are being incentivised for quick delivery of credit under the scheme through the extension of priority-sector classification to such lending up to 31st March, 2022.
These loans, he added, will continue to be classified under the 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,” the Governor said.
By way of an additional incentive, he said the banks will be eligible to park their surplus liquidity up to the size of the COVID loan book with 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.
A special long-term repo operation (SLTRO) for small finance banks (SFBs) was also announced by Das saying such lenders have been playing a prominent role by acting as a conduit for the 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,” he said.
This facility will be available till 31st October, 2021.
Das further said SFBs are now being permitted to reckon fresh lending to smaller MFIs (with asset size of up to Rs 500 crore) for on-lending to individual borrowers as priority-sector lending. At present, lending by SFBs to microfinance institutions (MFIs) for on-lending is not reckoned for priority-sector lending classification. This facility will be available up to 31st March, 2022.
Commenting on the decision, Aashit Shah, Partner, J Sagar Associates, said, “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 the much-needed liquidity to the emergency healthcare sector to battle the proliferating spread of the virus. A new-term liquidity facility for the 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.”