For cushioning the economic impacts of the second wave of Covid-19, the Reserve Bank of India on Wednesday announced various measures aimed at assisting the financing constraints being faced by vaccine manufacturers and importers of life-saving equipment, besides small/medium businesses and individuals.

The RBI announced special on-tap liquidity of ₹50,000 crores with tenor up to three years at repo rate (4%) for lending to emergency healthcare required for fighting the Covid-19 crisis. The macro impact of the scheme can be gauged from the fact that ₹50,000 crore is roughly 9% of India’s total health expenditure of ₹6-lakh crore under private final consumption expenditure in 2019-20. Unveiling these measures, governor Shaktikanta Das emphasized telling that the central bank is committed to devising new unconventional responses as and when the situation demands. According to Rahul Prithiani, Director, Crisil, Major beneficiaries of the announced healthcare liquidity scheme will be pharmaceutical manufacturers, vaccine-makers, healthcare equipment manufacturers, hospitals, and diagnostic players. Penetration of hospitals/dispensaries may increase as players can now opt for CAPEX funding. Also, diagnostic chains can use this opportunity to penetrate Tier-II cities and beyond. This restructuring is open up to September 30, 2021, and will have to be implemented within 90 days of invocation. In respect of individual borrowers and small businesses availing themselves for loan restructuring under Resolution Framework 1.0, under which the resolution plan permitted moratorium of fewer than two years, the RBI said lending institutions can modify such plans to increase the period of the moratorium and/or extend the residual tenor up to a total of two years. For small businesses and MSMEs restructured earlier, lending institutions can, as a one-time measure, review the working capital sanctioned limits.

For further incentivizing the inclusion of unbanked MSMEs into the banking system, the current incentive to deduct credit disbursed to new borrowers from banks’ deposits for calculation of the cash reserve ratio (CRR) has been extended further. This exemption, currently available for exposures up to ₹25 lakh and for credit disbursed up to the fortnight ending October 1, 2021, has been extended till December 31, 2021.