5 Key Announcements Made in Today’s RBI Governor’s Address (5th May 2021)

Reserve Bank of India Governor Shaktikanta Das made an address today. Here are the major announcements made by RBI Governor:

• Rs.50,000 crores priority lending for COVID-related health care services and infrastructure. So Banks can give fresh lending to importers and suppliers and manufacturers of Vaccine, pathology labs, hospitals, oxygen, and ventilator manufacturers, etc., and also patients who may be facing a sudden spike in health expenditure. The tenor of the loan is for a maximum of 3 years and is being made available till March 31st, 2022.

• Rs.10, 000 crores for Small finance Banks to provide support to small business units and credit to individuals.

Fresh lending of a maximum of Rs.10 lakhs per borrower can be given by the SFBs using this funding and will be available till October 31st, 2021.

• Resolution Framework for Individuals, Small business, and MSMEs (Earlier, the resolution framework was provided in August 2020).

1. Restructuring of the loans availed by borrowers who have not availed this facility earlier under any scheme shall be eligible provided they are considered as Standard as of March 31st, 2021 (Meaning there are no defaults in excess of 90 days).

2. If small businesses and individual borrowers have availed the restructuring under the previous Scheme, banks can extend the moratorium or extend the tenure period up to a total of 2 years.

3. As a One– time measure, the bank can review the working capital sanctioned limits based on the working – capital cycle (time taken for realization of funds invested) and margins (that would have been affected in these times).

• Credit to MSME Entrepreneurs

In order to incentivize the flow of credit facilities to new MSMEs, relaxation has been provided to banks while ascertaining the Cash reserve ratio. The exposure to New MSMEs to be excluded from the Net demand and time liabilities for the purpose of calculation thereby easing the funding pressure.

• Relaxation in KYC Norms

These measures are intended to provide ease of operating and starting bank accounts without physical verification using Video-based customer identification as well as an extension of time till Dec 31st, 2021 for periodic KYC updating of existing accounts.

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