MUMBAI: Reserve Bank of India on Wednesday extended relief to individuals and small businesses who have loans up to Rs 25 crore by allowing them to seek a loan restructuring if they are affected by the second wave of the Covid-19.
Announcing a series of steps to ensure financial stability, the central bank also loosened its purse strings to fund the war against the pandemic by providing a Rs 50,000 crore liquidity window to ramp up healthcare infrastructure. This has been topped with incentives for lenders who build a Covid-19 loan book.
“This is the first part of a calibrated and comprehensive strategy against the pandemic,” RBI governor Shaktikanta Das said and made it clear that he was willing to take many more “small and big steps”, including unconventional measures, and work with the Centre to “ameliorate the extreme travails” that citizens were facing “in this hour of distress”. The loan recast will be available to individuals – including home and other personal loans – and small and medium enterprises that did not restructure their loans in 2020 which were classified as standard accounts till March 2021.
The RBI also allowed lenders to provide relief to small and individual borrowers, who had availed of the restructuring option last year. Under the Rs 50,000 crore scheme, banks can lend to those involved in the war against Covid, including vaccine manufacturers, importers or suppliers of vaccines and priority medical devices, hospitals and dispensaries, pathology labs, manufacturers and suppliers of oxygen and ventilators, importers of vaccines and Covid related drugs, logistics firms and also patients for treatment.
The banks, Das said, are being incentivised for quick delivery of credit under the scheme through the extension of priority sector classification to such lending up to March 31, 2022. These loans, he added, will continue to be classified under the priority sector till repayment or maturity, whichever is earlier.
Bankers said, unlike last year, this year there is no blanket relief to borrowers on repayment and they will have to seek approval from lenders. Lenders can prevent small loans from going bad by doing a customised restructuring and giving them an additional two years to repay. This relief will cover 85-90% of all bank borrowers in India.
The governor also kept on his efforts to contain interest rates by announcing Rs 35,000 crore of government bonds on May 20 under its government securities acquisition plan. The announcement brought down bond yields to below 6% and boosted bank stocks in early trade.
According to SBI chairman Dinesh Khara the impact of the second wave was different from last year when there was a complete lockdown which disrupted cashflows. While acknowledging that the current quarter would be tough the impact on corporates balance sheets would be known only if the situation persisted and currently corporations could manage without relief.