The Reserve Bank of India (RBI) on Wednesday announced a host of measures, including a special ₹50,000 crore term liquidity facility for banks for on-lending to entities such as vaccine manufacturers involved in the fight against Covid-19, a special ₹10,000 crore long-term repo operation to support small finance banks to on-lend to MSEs, and a resolution framework 2.0 for individuals, small businesses and MSMEs.
The special ₹50,000 crore term liquidity facility for banks to create a Covid loan book will be three years tenor and available at the repo rate. This facility will be available to Banks up to March 31, 2022.
Banks’ creating Covid loan book by lending to entities such as vaccine manufacturers, importers of life-saving equipment, hospitals and clinics will be incentivised by giving such lending the priority sector lending (PSL) tag.
Further, they will also be allowed to park an amount equivalent to the amount deployed in the aforementioned activities in the reverse repo window and earn 40 basis points higher interest rate than the current reverse repo rate of 3.35 per cent.
Small Finance Banks can tap a special ₹10,000 crore long-term repo operation of three years tenor to on-lend to MSE up to ₹10 lakh per MSE. This facility will be available up to October 31, 2021.
Further, SFBs loans to micro-finance institutions (with asset size of up to ₹500 crroe) will be recognised as priority sector lending. This move is aimed at enhancing the flow of credit to MFIs.
RBI has brought in a resolution framework 2.0 for vulnerable borrowers — individuals, small businesses and MSMEs.
In order to incentivise new credit flow to the micro, small, and medium enterprise (MSME) borrowers, Banks will be allowed to deduct credit disbursed to ‘New MSME borrowers’ from their net demand and time liabilities (NDTL) for calculation of cash reserve ratio (CRR) up to December 31, 2021. This exemption will be available for exposures up to ₹25 lakh per borrower.