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RBI announces liquidity measures for sectors hard hit by COVID-19

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Under this program, banks can provide new loan support to hotels and restaurants

In an effort to support the revival of the sectors most affected by the COVID-19 pandemic, the Reserve Bank of India (RBI) on Friday decided to open a separate liquidity window of Rs 15,000 crore for certain sectors with high intensity of contact such as hotels and restaurants, tourism and ancillary aviation services.

This is in addition to the source liquidity window of Rs 50,000 crore with maturities of up to three years at the repo rate until March 31, 2022 to increase the provision of immediate liquidity to increase infrastructure and services health related to COVID in the country. This was announced on May 5.

“In order to mitigate the negative impact of the second wave of the pandemic on certain sectors with high contact intensity, a separate liquidity window of Rs 15,000 crore is open until March 31, 2022, with maturities ranging up to at three years at the repo rate. “said RBI Governor Shaktikanta Das when announcing the bimonthly monetary policy.

Under this program, banks can provide new financial support to hotels and restaurants; tourism – travel agents, tour operators and adventure / heritage facilities; ancillary aviation services – ground support and supply chain; and other services which include private bus operators, car repair services, car rental service providers, event / conference organizers, spa clinics and beauty salons / salons, a he declared.

“As an incentive, banks will be allowed to park their excess liquidity up to the size of the loan portfolio created under this program with the Reserve Bank under the repo window at a lower rate of 25bp to the repo rate or, differently called, 40bp higher than the reverse repo rate, ”he said.

To help, the finance ministry earlier this week expanded the scope of the Rs 3 lakh crore emergency line of credit guarantee program (ECLGS), which will now offer concessional loans to hospitals for the establishment. on-site oxygen production plants. In addition, the validity of the program has been extended for three months until September 30 and or until guarantees in the amount of Rs 3 lakh crore are issued.

The government has also removed the current ceiling of Rs 500 crore of outstanding loan for eligibility under ECLGS 3.0, subject to the maximum additional ECLGS assistance to each borrower being limited to 40% or Rs. 200 crore, whichever is lower.

Loans to the civil aviation sector were made eligible under ECGLS 3. 0. ECGLS 3. 0 previously covered commercial enterprises in the hospitality, travel and tourism, leisure and business sectors. sport, which had, as of February 29, 2020, a total outstanding amount exceeding Rs 500 crore and overdue, if any, was 60 days or less, on that date.

To fuel the still nascent growth impulses and ensure a continued flow of credit to the real economy, he said, the Reserve Bank granted new support of Rs 50,000 crore on April 7, 2021 to all Indian financial institutions (AIFI) for new loans in 2021-22. This included Rs 15,000 crore to the Small Industries Development Bank of India (SIDBI).

“To further support the financing needs of micro, small and medium enterprises (MSMEs), especially smaller MSMEs and other enterprises, including those in low credit and ambitious districts, it was decided to expand a special liquidity facility of Rs 16,000 crore to SIDBI for retrocession / refinancing through new models and structures, ”he said.

This facility will be available at the current policy repo rate for a period of up to one year, which can be extended depending on its use, he said.

To provide greater flexibility in raising short-term funds by regional rural banks (RRBs), said Das, it has now been decided to allow these banks to issue certificates of deposit (CDs) to eligible investors.

“In order to offer issuers greater flexibility in liquidity management, it has also been decided that all CD issuers will be allowed to redeem their CDs before maturity, under certain conditions,” he said. .

In December 2020, RRBs were authorized to access Reserve Bank liquidity counters as well as the notice / call money market in order to facilitate more efficient liquidity management by RRBs at competitive rates.

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