RBI MEASURES TO TACKLE COVID-19 BURDEN

RBI MEASURES TO TACKLE COVID-19 BURDEN

Subject : Economics

Context: The RBI Governor Shaktikanta Das announced a series of measures to support the nation’s fight against the second wave of COVID-19 infections.

Concept :

• Term Liquidity Facility
• Term liquidity facility of Rs. 50,000 crore with tenure of up to 3 years, at repo rate, to ease access to emergency health services, for ramping up COVID-related health infrastructure & services.
• ​Financial institutions with short liquidity positions could borrow from BOT via repurchase transactions using an extended list of eligible securities.
• This term liquidity facility aims to provide funding for financial institutions in an efficient and effective manner so as to help maintain stability in the financial system.​
• Special Long Term Repo Operations for Small Finance Banks: In order to provide further support to micro, small and other unorganized sector entities, 3-year repo operations of Rs. 10,000 crore at repo rate, for fresh lending up to Rs 10 lakh per borrower; facility is available up to 31 October, 2021.
• Lending by Small Finance Banks (SFBs) to MFIs for on-lending to be classified as priority sector lending: In view of fresh challenges, SFBs are now permitted to regard fresh on-lending to MFIs with asset size up to Rs. 500 crore, as priority sector lending. This facility will be available up to 31 March, 2022.
• Credit flow to MSME Entrepreneurs: To further incentivize inclusion of unbanked MSMEs into banking system, exemption provided in February, 2021 wherein scheduled banks were allowed to deduct credit given to new MSME borrowers from Net Time & Demand Liabilities for calculation of CRR, is now extended to December 31, 2021.