Mr.Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on RBI Relief 2.0 May 2021
"As in the previous year, RBI has taken proactive accommodative measures to provide relief to the financial sector and to the borrowers in the wake of the intense Covid second wave.
One of the important measures is the long term repo facility of Rs 50,000 Cr for lending to the health care sector particularly all the activities that support the fight against Covid including vaccine production, distribution, oxygen production, infrastructure expansion etc. Significant incentives have been provided to the banks to lend to the healthcare sector including categorisation as priority sector lending.
Another one is the special window facility (SLTRO) of Rs 10,000 Cr to SFBs (small finance banks) for on lending to smaller microfinance institutions (AUM < Rs 500 Cr) among others.
While no fresh blanket moratorium has been provided for Covid 2.0, banks have been permitted to restructure smaller loans of exposure less than Rs 25 Cr (OTR 2.0) which have been standard as on March 2021. Further, for loans which have already been restructured under OTR 1.0, the terms can be modified to enhance the moratorium period for a maximum of 2 years.
Also, the liquidity in the financial system will be maintained at a comfortable level with RBI proposing to buy gsecs upto Rs 35,000 Cr under GSAP 1.0 in May 2021.
In our opinion, these measures will support the availability of credit to the healthcare sector which needs to ramp up significantly to address the Covid 2.0 challenges. Secondly, the restructuring option has been extended till Sep 2021 for retail and MSME borrowers with loans upto Rs 25 Cr apart from giving more flexibility to revise the terms of restructuring under OTR 1.0 - this will go some way in providing relief for the additional stress generated by the second wave. Thirdly, the access to funds for SFBs has been enhanced with the SLTRO of Rs 10,000 Cr at the repo rate which is expected to be deployed for lending to not only retail and micro businesses but also to smaller microfinance institutions that have been facing funding challenges."