The Reserve Bank of India (RBI) on Friday introduced additional liquidity and regulatory coverage measures to assist residents and companies affected through the second Covid-19 wave.
During his monetary policy review address, RBI Governor Shaktikanta Das mentioned, “Against this backdrop and based on our continuing assessment of the macroeconomic situation and financial market conditions, certain additional measures are being announced.”
Here are the additional measures introduced by the RBI to assist tackle the second Covid-19 pandemic:
ADDITIONAL LIQUIDITY FOR CONTACT-INTENSIVE SECTORS
The RBI has introduced a separate liquidity window of Rs 15,000 crore so as to mitigate the hostile affect of the second wave of Covid-19 on some contact-intensive sectors. The scheme will assist affected companies lend until March 31, 2022.
“Under the scheme, banks can provide fresh lending support to hotels and restaurants; tourism — travel agents, tour operators and adventure/heritage facilities; aviation ancillary services — ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organisers, spa clinics, and beauty parlours/saloons,” mentioned Shaktikanta Das.
Banks can even be incentivised for such lending. “By way of an incentive, banks will be permitted to park their surplus liquidity up to the size of the loan book created under this scheme with the Reserve Bank under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed differently, 40 bps higher than the reverse repo rate,” he added.
This is as well as to the on-tap liquidity window of Rs 50,000 crore introduced by the RBI earlier.
“Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above will also be eligible for this incentive,” the central financial institution mentioned in an in depth assertion.
SPECIAL LIQUIDITY FACILITY TO SIDBI
The central financial institution has determined to lengthen a particular liquidity facility of Rs 16,000 crore to the Small Industries Development Bank of India (SIDBI) to help funding necessities of MSME, notably smaller ones and different companies together with these in credit score poor and aspirational districts.
SIDBI can use the quantity for on-lending/refinancing by way of novel fashions and constructions. “This facility will be available at the prevailing policy repo rate for a period of up to one year, which may be further extended depending on its usage,” the RBI governor mentioned.
EXPANSION OF RBI’S RESOLUTION FRAMEWORK 2.0
RBI Governor Shaktikanta Das has introduced that the central financial institution’s Resolution Framework 2.0 might be expanded to permit higher protection of debtors underneath the scheme.
This might be performed by enhancing the mixture publicity threshold from Rs 25 crore to Rs 50 crore for MSMEs, non-MSME small companies and loans to people for enterprise functions.
“The above categories of borrowers to whom the lending institutions have aggregate exposure of not more than Rs 50 crore as on March 31, 2021, and which have not been restructured earlier under any of the specified restructuring frameworks, shall be eligible to be considered for resolution under Resolution Framework 2.0. All other conditions shall remain the same,” RBI mentioned in an in depth assertion.
BENEFIT FOR FOREIGN PORTFOLIO INVESTORS
RBI Governor Shaktikanta Das mentioned that the central financial institution has been taken a number of measures to encourage investments by Foreign Portfolio Investors (FPIs) within the Indian debt market. It has now one other measure to assist ease operation constraints face by FPIs.
“With a view to easing operational constraints faced by FPIs and promoting ease of doing business, it has been decided to permit Authorised Dealer banks to place margins on behalf of their FPI clients for their transactions in Government securities (including State Development Loans and Treasury Bills), within the credit risk management framework of banks,” Das mentioned.
GREATER LIQUIDITY FLEXIBILITY FOR RRBs
The RBI has determined to allow Regional Rural Banks (RRBs) to situation Certificates of Deposit (CDs) to eligible traders which can assist them acquire higher flexibility in elevating short-term funds.
“With a view to providing issuers with greater flexibility in liquidity management, it has also been decided that all issuers of CDs will be permitted to buy back their CDs before maturity, subject to certain conditions,” RBI mentioned.