RBI announces on-tap liquidity window of Rs. 50,000 crore for healthcare infra, services firms

In response to an increase in coronavirus cases, the RBI announced a Rs. 50,000 crore (US$ 6.77 billion) on-tap liquidity window for firms involved in healthcare infrastructure and services on Wednesday.

While announcing measures to deal with the effect of the second wave of coronas, RBI Governor, Mr. Shaktikanta Das said that the facility of on-tap liquidity with tenors of up to three years at the repo rate will remain open until March 31, 2022.

The scheme may benefit vaccine manufacturers, importers/suppliers of vaccines and priority medical devices, hospitals and pharmacies, pathology laboratories, manufacturers and suppliers of oxygen and ventilators, importers of vaccines and COVID-19 related medicines, logistics companies, and patients for care.

According to Mr. Das, the scheme incentivizes banks to offer credit quickly by extending priority sector classification to such lending until March 31, 2022.

He stated that these loans will remain in the priority sector until they are repaid or matured, whichever comes first.

Banks can provide these loans to borrowers directly or through RBI-regulated financial intermediaries. Under the system, banks are required to establish a COVID-19 loan book.

He also mentioned that banks would be able to drive their excess liquidity with the RBI under the reverse repo window up to the size of the COVID-19 loan book at a rate that is 25 basis points lower than the repo rate or, to put it differently, 40 basis points higher than the reverse repo rate.

Mr. Das also announced a special long-term repo operation (SLTRO) for small finance banks (SFBs), stating that such lenders have played a significant role in the last-mile supply of credit to individuals and small businesses.

He said, "It has been agreed to conduct special three-year long-term repo operations (SLTRO) of Rs. 10,000 crore (US$ 1.35 billion) at repo rate for the SFBs, to be deployed for fresh lending of up to Rs. 10 lakh (US$ 13.54 thousand) per borrower, to provide additional support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic."

This service will be provided until October 31, 2021.

SFBs will now count new lending to smaller MFIs (with assets of up to Rs. 500 crore (US$ 67.68 million)) as priority sector lending for on-lending to individual borrowers. SFB lending to microfinance institutions (MFIs) for on-lending is not included in the priority sector lending classification at the moment. This service will be made available until March 31, 2022.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.