RBI Governor Statement: The situation has reversed from being on foothills of strong economic recovery to facing a fresh crisis

Reserve Bank of India (RBI) Governor Shaktikanta Das today made an unscheduled speech as the second wave of coronavirus continues to devastate the country. “As the financial year 2020-21 – the year of the pandemic – was drawing to a close, the Indian economy was advantageously poised, relative to peers. India was at the foothills of a strong recovery, having regained positive growth, but more importantly, having flattened the infections curve. In a few weeks since then, the situation has altered drastically. Today, India is fighting a ferocious rise in infections and mortalities. New mutant strains have emerged, causing severe strains on healthcare and medical facilities, vaccine supplies and frontline health personnel. The fresh crisis is still unfolding. India has mounted a valiant defence, domestically and globally, to ramp up vaccines and medical support, and save lives” he said.

The Governor announced several measures to support the economy at the time when India has emerged as the coronavirus hotspot. India has already crossed the 2-crore mark in total COVID infections caseload just behind the United States and ahead of Brazil he said. The devastating speed with which the virus affects different regions of the country has to be matched by swift-footed and wide-ranging actions that are calibrated, sequenced and well-timed so as reach out to various sections of society and business, right down to the smallest and the most vulnerable. While doing so, our admiration and gratitude goes out to the brave citizens of our nation, to our doctors, healthcare and medical staff, police and law enforcement agencies and to other authorities who battle the second surge selflessly and tirelessly and have been at the frontline for more than ever.

Expressing faith in India’s resilence and capacity to overcome all odds wich he expressed several occassion, the Governor referred Mahatma Gandhi’s quote “My faith is brightest in the midst of impenetrable darkness”. Reserve Bank of India would continue to monitor the emerging COVID19 situation and will deploy all resources and instruments at its command especially for the citizens, business entities, and institutions beleaguered by the second wave.” he said.

Against the backdrop  of emerging COVID 19 situation and based on our continuing assessment of the macroeconomic situation and financial market conditions, the Central Bank propose to take further measures, as enumerated below.

• An on-tap liquidity window of ₹50,000 crore with tenors of up to three years at the repo rate is being opened till March 31, 2022 to Ease Access to Emergency Health Services . Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufactures; 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 patients for treatment.
• It has been decided to conduct special three-year long-term repo operations (SLTRO) of ₹10,000 crore at repo rate for the SFBs, to be deployed for fresh lending of up to ₹10 lakh per borrower. This facility will be available till October 31, 2021.
• In order to incentivise inclusion of unbanked MSMEs into the banking system, Scheduled Commercial Banks were allowed to deduct credit disbursed to new MSME borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR). This exemption currently available for exposures up to ₹25 lakh and for credit disbursed up to the fortnight ending October 1, 2021 is being extended till December 31, 2021. MSMEs having aggregate exposure of upto ₹25 crore and who have not availed restructuring under any of the earlier restructuring frameworks and who were classified as ‘Standard’ as on March 31, 2021 shall be eligible to be considered under Resolution Framework 2.0.
• In order to mitigate the pandemic related stress banks are being allowed to utilise 100 per cent of floating provisions/countercyclical provisioning buffer held by them as on December 31, 2020 for making specific provisions for non-performing assets with prior approval of their Boards. Such utilisation is permitted with immediate effect and up to March 31, 2022.
• To enable the State Governments to better manage their fiscal situation in terms of their cash-flows and market borrowings, certain relaxations are being permitted with regard to availment of Overdraft (OD) facilities. Accordingly, the maximum number of days of OD in a quarter is being increased from 36 to 50 days and the number of consecutive days of OD from 14 to 21 days. This facility will be available up to September 30, 2021. The Ways and Means Advance (WMA) limits of states have already been enhanced on April 23, 2021.
• It has been decided to rationalise certain components of the extant KYC norms

In closing, he again quoted the words of Mahatma Gandhi, “Our faith should be like an ever-burning lamp which not only gives us light but also illuminates the surroundings.”