Key Announcements:

             Reopen of one-time restructuring of Loans

  • RBI has reopened one-time restructuring for individuals, MSMEs. These borrowers should have been standard as on March 31, 2021. Borrowers will be permitted one-time restructuring till September 30, 2021. Under the restructuring 1.0, the period of moratorium can be extended up to a total of 2 years.

 

     Loans under Priority sector for Pharma Sector

  • Opened a Rs 50,000-crore on-tap liquidity window with tenor of up to three years at the repo rate till March 31, 2022 in which banks will be able to provide funding to borrowers, including vaccine manufacturers, importers of vaccines and medical devices, hospitals and dispensaries, pathology labs, manufacturers of oxygen cylinders, logistics firms and patients under treatment.

 

  • These loans will be classified under priority sector till repayment or maturity, whichever is earlier. Banks are also being incentivized for a quick delivery of credit under the scheme to 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 40 basis points higher than the reverse repo rate which is 3.35%.

 

Second purchase of government securities under G-SAP 1.0 Programme

  • Second purchase of government securities for Rs 35,000 crore under G-SAP 1.0 will be conducted on May 20. Under the first tranche of the programme worth Rs 25,000 crore was conducted on April 15. For the first quarter of FY22, secondary market bond purchases of Rs 1 lakh crore were announced under G-SAP 1.0 in RBI Bi- Monthly Monetary Policy in March, 2021.

 

State overdraft tenure Extension

  • The RBI will allow states to remain in overdraft for a maximum of 50 days. The limit was 36 days earlier. Besides, the number of consecutive overdraft days will go up to three weeks from two weeks earlier. This facility pertains to funds under the Ways and Means Advances.

 

Support to Small Finance Banks and Micro finance institutions

  • Announced a special long-term repo operation window for SFBs, whereby the banks can borrow funds up to Rs 10,000 crore at repo rate for deploying fresh lending of up to Rs 10 lakh per borrower. SFBs permitted to on-lend to smaller microfinance institutions of asset size upto Rs 500 crore under priority sector. This facility will be available till October 31, 2021.

 

Other Announcements

  • Banks allowed to utilize 100 per cent of floating provisions/countercyclical provisioning buffer held by them as on December 31, 2020 for making specific provisions for nonperforming asset with immediate effect and up to March 31, 2022.

 

  • Permitted Regulated Entities are being advised that for the customer accounts where periodic KYC updating is due/pending, no punitive restriction on operations of customer account(s) shall be imposed till December 31, 2021. Account holders are requested to update their KYC during this period.

 

     Outlook:

RBI announcement of three-year facility in which the banks can advance up to the of Rs. 50,000 crores, is a good measure to help medical and healthcare facilities. The benefits of this will help enhance capacity for the longer term. Further restructuring of loans could bring some relief to the MSMEs, small businesses and individuals and will help them overcome the uncertainties caused due to the second wave. The measure to increase the maximum number of days a state can be in overdraft mode is very proactive as given that the lockdowns this time are regional and will affect the revenue flows of the state governments.

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