RBI Governor talks about getting through the COVID crisis

RBI Governor talks about getting through the COVID crisis and lays measures for MSMEs and Small Businesses. Important Announcements by RBI Governor in an unscheduled meeting held on 5th May 2021.

RBI Governor Shaktikanta Das held an unscheduled meeting last Wednesday (5th May, 2021) in which he discussed the way forward and laid off measures for the smaller and medium businesses to deal with the resurging covid wave.

Starting his address while talking about the positive economic recovery during the last year lockdown, he limelighted the adverse impact that the second covid wave has brought upon the country’s economy. Quoting Mahatma Gandhi in his address Governor Das said “My faith is brightest in the midst of impenetrable darkness” and have conveyed that these words are a remedy for everyone in the current times.

RBI Resolution Framework 2.0

RBI named the coping mechanism as Resolution Framework 2.0 and has announced the restructuring to be available for the individual borrowers,small businesses and MSMEs which have aggregate exposure of upto 25 crores as according to the governor “Small businesses and financial entities at the grassroot level are bearing the biggest brunt of the second wave of infections”.

The restructuring under the proposed framework will take upto 30th September 2021 to be invoked.

One-Tap Liquidity Facility of ₹50,000 crore to Ease Access to Emergency Health Services. This scheme has been planned so that banks can offer lending support to the Healthcare entities including vaccine manufacturers; importers/suppliers of vaccines and priority medical devices; hospitals/dispensaries; pathology labs; manufactures and suppliers of oxygen and ventilators; importers of vaccines and COVID related drugs; logistics firms and also to the common man for treatment.

With an assessment of the current economic situation the RBI issued certain measures and calibrated a comprehensive strategy against the pandemic:

1. Approved the conducting of Special three-year long-term repo operations (SLTRO) of ₹10,000 crore at repo rate for the Small Finance Banks, to be deployed for fresh lending of up to ₹10 lakh per borrower. This facility will be available till October 31, 2021.

2. Decisions have been taken to rationalise certain components of the KYC requirements.This includes allowing video KYC known as V-CIP, enabling the use of KYC-identifier and submission of electronic documents and introduction of more customer-friendly options.

3. Small Finance Banks are allowed to grant fresh lending to small Micro-Finance Institutions upto 31st March 2022.

4. Relaxation has been provided to the state governments in the Overdraft facility(OD). The maximum number of days of OD has been increased to 50 from 36 and, similarly, the maximum number of consecutive days of OD has been increased to 21 days from 14 days.

5. Banks have been allowed to utilise cent percent of the floating provisions/countercyclical provisioning buffer held by them as on December 31, 2020.

He also concluded his speech with this quote of Gadhiji’s

Our faith should be like an ever-burning lamp which not only gives us light but also illuminates the surroundings

and insisted upon the need of sustainable growth with macroeconomic and financial stability.

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