RBI governor Shaktikanta Das said the central bank will make available an on-tap liquidity window of Rs50,000 crore for supporting healthcare infrastructure and a special three-year special long-term repo operations of Rs10,000 crore for small finance banks
The Reserve Bank of India (RBI) on Wednesday unveiled a series of liquidity measures to help banks support the healthcare infrastructure and small borrowers impacted by second covid wave. In a surprise virtual press briefing on Wednesday, RBI governor Shaktikanta Das said the central bank will make available an on-tap liquidity window of Rs50,000 crore for supporting healthcare infrastructure and a special three-year special long-term repo operations (SLTRO) of Rs10,000 crore for small finance banks (SFBs). Additionally, RBI also announced the second tranche of Rs35,000 crore under government securities acquisition programme (GSAP 1.0).
First, Das said the term liquidity facility with tenor of up to three years will be offered at the repo rate. This facility will be made available till 31 March 2022.
Under the scheme, banks can provide fresh lending support to a wide range of entities, including vaccine manufactures, 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, RBI said.
All loans given under this scheme will classified as priority sector loans, till repayment or maturity. Banks can disburse these loans to borrowers directly or through intermediary financial entities regulated by the RBI.
Das also said banks are expected to create a covid loan book under the scheme. By way of an additional incentive, banks can park their surplus liquidity up to the size of the covid loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate, or 40 bps higher than the reverse repo rate.
Additionally, Das also announced that the central bank will conduct the second purchase of government securities worth Rs35,000 crore under GSAP 1.0 on 20 May. RBI had announced the Rs1 trillion GSAP 1.0 in the April monetary policy. Under this the first tranche of Rs25,000 crore was conducted on 15 April.
“With system liquidity assured, the RBI is now focusing on increasingly channelizing its liquidity operations to support growth impulses, especially at the grass-roots level," Das said.
With an aim to provide credit to individuals and small businesses, the RBI governor added, the central bank will conduct a a three-year SLTRO of Rs10,000 crore for SFBs. These banks can on-lend the money taken under this window up to Rs10 lakh per borrower. This facility will be available till 31 October 2021.
Das said that lending by SFBs to smaller microfinance institutions (MFIs) for on-lending will be classified as priority sector lending loans .
“’In view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to smaller MFIs (with asset size of up to Rs500 crore) for on-lending to individual borrowers as priority sector lending. This facility will be available up to 31 Ma 2022," Das said.
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