The measures include liquidity for bank lending to businesses, continued regulatory exemptions, and an additional round of restructuring and moratoria flexibility.
The RBI (Reserve Bank of India) has announced a string of measures aimed at supporting the financial sector, businesses and households though India’s second wave of Covid-19 pandemic.
“India is fighting a ferocious rise in infections and mortalities,” RBI Governor Shaktikanta Das said at an unscheduled press conference. “New mutant strains have emerged, causing severe strains on healthcare and medical facilities, vaccine supplies and frontline health personnel.”
In his speech, Das set out new measures the RBI will undertake as “the first part of a calibrated and comprehensive strategy” against the pandemic.
He said the RBI would be buying INR 350 billion of bonds from the secondary market on 20 May, as part of the INR 1 trillion G-SAP scheduled for the quarter – of which INR 250 billion has already been used.
The additional measures announced include:
- INR 500 billion term liquidity facility from which banks can draw cheap funding to finance emergency health services such as vaccine development, hospitals, ventilators and drugs.
- INR 100 billion worth of special three-year long-term repo operations (SLTRO) to enable small finance banks to supply fresh credit to small businesses, up to INR 1 million per borrower (until 31 October 2021)
- Small finance banks can classify fresh lending to microfinance institutions for on-lending to individual borrowers as priority sector lending (until 31 March 2022)
- Continued exemption allowing banks to deduct credit disbursed to new MSME borrowers from their NDTL for calculation of the cash reserve ratio (until 31 December 2021)
- Resolution Framework 2.0, which allows individual borrowers, small businesses and MSMEs added flexibility to avail of restructuring frameworks, increase moratorium periods, extend residual loan tenors, and obtain additional working capital from banks
- Rationalisation of KYC norms to extend the scope of video KYC for new categories of customers, convert limited KYC accounts in non-face-to-face mode to fully KYC-compliant accounts, enable the use of CKYCR identifiers in video KYC and electronic document submission, allow digital channels for periodic updation of customer KYC details, and exempt customers from penalties for late periodic KYC updates
- Utilisation of 100 percent of floating provisions and countercyclical provisioning buffers held by banks for making specific provisions for NPAs with prior approval of their Boards (until 31 March 2022)
“The immediate objective is to preserve human life and restore livelihoods through all means possible,” Das said. “The second wave, though debilitating, is not unsurmountable.”
“At the RBI, we stand in battle readiness to ensure that financial conditions remain congenial and markets continue to work efficiently. We will work in close co-ordination with the Government to ameliorate the extreme travails that our citizens are undergoing in this hour of distress.”