BIG BOOST! RBI introduces Rs 15,000 crore liquidity window for contact-intensive sectors - Banks can provide fresh lending support to hotels, restaurants

The Reserve Bank of India (RBI) opened a separate liquidity window of Rs 15,000 crore till March 31 next year to mitigate the adverse impact of Covid-19's second wave on certain contact-intensive sectors. RBI Governor Shaktikanta Das said that the facility will have tenors of up to three years at repo rate (4 percent).

Under the scheme, banks can provide fresh lending support to hotels and restaurants; tourism -- travel agents, tour operators and adventure/heritage facilities; aviation ancillary services -- ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organisers, spa clinics, and beauty parlours/saloons, as per a report by ANI.

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Banks, by way of an incentive, will be permitted to park their surplus liquidity up to the size of loan book created under this scheme with the RBI under reverse repo window at a rate which is 25 basis points lower than repo rate. Or, termed in a different way, 40 basis points higher than the reverse repo rate.

The RBI has also decided to extend a special liquidity facility of Rs 16,000 crore to SIDBI for on-lending/refinancing through novel models and structures. This has been done to further support the funding requirements of micro, small and medium enterprises (MSMEs), particularly smaller MSMEs and other businesses including those in credit deficient and aspirational districts.

This facility will be available at the prevailing policy repo rate for a period of up to one year, which may be further extended depending on its usage.

On May 5, the central bank had announced Resolution Framework 2 and now enabling a larger set of borrowers to avail of benefits under Resolution Framework 2, the RBI has expanded coverage of borrowers by enhancing maximum aggregate exposure threshold from Rs 25 crore to Rs 50 crore for MSMEs, non-MSME small businesses and loans to individuals for business purposes.

"The RBI remains fully committed to creating an enabling environment in which a sound and efficient financial sector flourishes while preserving financial stability," said Das.