The immediate objective is to preserve human life and restore livelihoods through all means possible, RBI Governor Shaktikanta Das said.

MUMBAI, May 5 (The CONNECT) - With focus on preserving human life and restore livelihoods through all means possible, the Reserve Bank today announced an on-tap liquidity window of ₹50,000 crore with tenors of up to three years at the repo rate that will be open till March 31, 2022.

The liquidity is aimed at ramping up COVID related healthcare infrastructure and services in the country, RBI Governor Shaktikanta Das said.

Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufactures; importers and suppliers of vaccines and priority medical devices; hospitals and dispensaries; pathology labs; manufactures and suppliers of oxygen and ventilators; importers of vaccines and COVID related drugs; logistics firms and also patients for treatment.

The RBI governor said the second wave, though debilitating, is not unsurmountable. “As I have said earlier, it is during our darkest moments that we must focus on the light. We have lessons to draw from our experience of last year, when as a nation we came together and overcame the once-in-a-generation challenge imposed by the first wave of the pandemic,” Das said.

Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending up to March 31, 2022. These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier. Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI. Banks are expected to create a COVID loan book under the scheme. By way of an additional incentive, such banks will be eligible 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 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate.

Small finance banks (SFBs) have been playing a prominent role by acting as a conduit for last mile supply of credit to individuals and small businesses. To provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic, it has been decided to conduct special three-year long-term repo operations (SLTRO) of ₹10,000 crore at repo rate for the SFBs, to be deployed for fresh lending of up to ₹10 lakh per borrower. This facility will be available till October 31, 2021

Lending by Small Finance Banks (SFBs) to MFIs for on-lending to be classified as Priority Sector Lending

At present, lending by Small Finance Banks (SFBs) to Micro-Finance Institutions (MFIs) for on-lending is not reckoned for priority sector lending (PSL) classification. 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 ₹500 crore) for on-lending to individual borrowers as priority sector lending. This facility will be available up to March 31, 2022.