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What RBI measures mean for vaccine makers, hospitals, individuals and MSMEs

A Rs 50,000-crore window for healthcare sector, loan repayment relief for individuals and small firms, and a relief from updating KYC are some of the measures announced.

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New Delhi: In one of its first responses to the second wave of the Covid-19 pandemic, the Reserve Bank of India (RBI) Wednesday announced many relief measures to support vaccine manufacturers, healthcare sector, individual borrowers and small businesses.

RBI Governor Shaktikanta Das also struck an optimistic note on the economy and said that the second wave’s impact may be minimal with limited hit on consumption and aggregate demand. Das did not rule out further supportive measures and said the RBI remains “proactive” and will take necessary steps responding to the situation.

Here’s a look at what the different measures mean for different borrowers.

Also read: S&P cuts India’s GDP growth forecast to 9.8% for 2021-22 fiscal due to second Covid wave

For vaccine makers and hospitals

The RBI announced that there will be an on-tap liquidity window of up to Rs 50,000 crore for lending to the healthcare sector by banks, which will be open till 31 March 2022.

This means that banks can avail of these funds from the central bank at the repo rate to further lend to companies and individuals operating in the healthcare sector. These include vaccine manufacturers, importers and suppliers of vaccines and priority medical devices, importers of Covid related drugs, hospitals and dispensaries, pathology labs, manufactures and suppliers of oxygen and ventilators, logistics firms and also patients for treatment.

The central bank is trying to cater to the funding requirements of the entire healthcare sector and enabling access to emergency capital requirements of these entities.

These steps will enable domestic vaccine manufacturers like Serum Institute of India and Bharat Biotech to expand their production capacity to rapidly vaccinate India and the world. In addition, it will also help firms like Biological E and Dr Reddy’s who will import and/or manufacture vaccines like Johnson and Johnson and Sputnik V, respectively.

It will also help healthcare chains and pathological labs to expand capacity and purchase necessary medical equipment to ramp up their infrastructure and capacity.

Even firms that are involved in manufacturing, and supplying oxygen-related equipment and ventilators, and all logistics firms can also avail this window. This could ease the immediate working capital requirements of start-ups in the logistics space.

The loans under this window could be of up to a three-year tenure.

The central bank has also proactively announced steps to nudge banks to use this window to counter the risk aversion of the latter.

Lending to these sectors will be classified as priority sector lending up 31 March 2022. Banks have even been given the option of lending to non-banking finance companies, which will further lend to the approved entities.

Coining the concept of a Covid loan book, the RBI said banks get better interest rates from the central bank for its surplus liquidity up to the size of the loan book.

Also read: India’s Covid crisis shows lack of foresight, complacency, says Raghuram Rajan

For small businesses

Das termed small businesses and Micro, Small & Medium Enterprises (MSMEs), along with individuals as the most vulnerable category amid the pandemic’s deadlier second wave.

The central bank also extended incentives for banks to lend to MSMEs by allowing exposures to be deducted from the banks’ liabilities for calculation of maintaining the cash reserve ratio — or the amount of cash reserves that need to be maintained by the bank given its total deposits.

This could nudge banks to continue lending to MSMEs, which are expected to be the worst hit by the second wave.

The RBI has announced steps for borrowers who were stressed even in the first wave of the pandemic, as well as for those who were insulated in the first wave but are struggling now.

For those firms that were stressed previously and availed the loan restructuring scheme announced last year, the RBI has allowed banks to extend the moratorium and if required extending the residual tenor of the loan for up to a total of two years.

For firms that were in good health previously and are only now feeling the impact of the pandemic, the central bank has announced allowed them to avail the restructuring scheme up to 30 September. However, the company’s aggregate loan exposure to all banks has to be less than Rs 25 crore for eligibility.

Further, in a move that will benefit all small firms, banks have been allowed to reassess the working capital requirements of the firms and review the working capital sanctioned limits.

For individuals

The loan restructuring scheme announced for MSMEs has been extended to individual borrowers as well. All individual loan accounts of up to Rs 25 crore will be eligible for either fresh loan restructuring or for revision in terms of the earlier restructuring proposal entered into with banks.

In addition, individuals impacted by Covid can take loans for treatment from banks under the Rs 50,000 crore window announced by RBI.

Individuals have also got relief from updating their Know Your Customer (KYC) details that are being regularly sought by banks. Banks have been instructed to not take any punitive action over pending KYC till 31 December 2021.

In addition, the RBI has also extended video KYC to more categories of customers and allowed for updating KYC digitally.

Also read: Unemployment rate rises to 4-month high as Covid surge leaves another 7 million people jobless


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