Reserve Bank of India (RBI) Governor Shaktikanta Das
Reserve Bank of India (RBI) Governor Shaktikanta Das on May 5 announced a special long-term repo operation (SLTRO) for small finance banks, amid the second wave of COVID-19 cases in the country. The central bank will conduct the special operation of Rs 10,000 crore at repo rate, Das said.
“Small finance banks (SFBs) have been playing a prominent role by acting as a conduit for last mile supply of credit to individuals and small businesses,” Das said during an unscheduled address.
"To provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic, it has been decided to conduct special three-year long-term repo operations of Rs 10,000 crore at repo rate for the SFBs, to be deployed for fresh lending of up to Rs 10 lakh per borrower,” Das said, adding that the facility will remain open till October 31, 2021.
Read: RBI Governor announces second purchase of govt securities worth Rs 35,000 crore under G-SAP 1.0
Das said that the RBI is monitoring the emerging developments related to the second wave of COVID-19 and its impact on the economy. The global economic outlook is highly uncertain and clouded with downside risks, Das observed.
A forecast of a normal monsoon by the India Meteorological Department is likely to help sustain rural demand and have a soothing impact on inflation pressures, Das said.
The central bank governor also announced a Rs 50,000-crore on-tap liquidity facility to ramp up health infrastructure and additional loan restructuring schemes amid a series of measures to help the financial services industry tide over the second coronavirus wave that threatens economic recovery.
Also read: RBI Governor announces COVID-19 relief measures under Restructuring Resolution Framework 2.0
In April, ratings agency Moody’s had flagged the risks to the economy on account of the second wave of novel coronavirus infections. “The second wave of infections presents a risk to our growth forecast as the re-imposition of virus management measures will curb economic activity and could dampen market and consumer sentiment,” the rating agency had said.
Earlier, S&P Global Ratings had also said that systemic risk in Indian banks is likely to remain high in the wake of the spike in COVID-19 cases and high proportion of weak loans.
In 2020, the impact of the nationwide lockdown was not seen on banks’ earnings because of the emergency measures announced by the central bank and the government. The RBI had announced a six-month moratorium and a subsequent one-time restructuring facility for banks. This had helped banks to escape a huge spike in their non-performing assets (NPAs).
India has been badly hit by the second wave of coronavirus infections as hospitals in several states are reeling under a severe shortage of oxygen, drugs, equipment and beds.
On May 4, India's tally of COVID-19 cases crossed the 2-crore mark with over 50 lakh infections being added in just 15 days. The virus has claimed 2.22 lakh lives so far, as per health ministry's figures.Follow Moneycontrol’s full coverage of the coronavirus pandemic here