MUMBAI: Amidst a ferocious second wave of the COVID-19 pandemic, the Reserve Bank of India (RBI) Governor Shaktikanta Das today announced measures to ease the economic stress of the pandemic. The measures include a second loan- restructuring framework and liquidity windows for advancing credit to a number of segments of the economy.

The RBI’s fresh restructuring resolution is targeted at individuals, small businesses and micro, small and medium enterprises (MSMEs) who have an aggregate exposure of up to Rs 25 crore. The borrowers who have not opted for restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who are classified as standard assets as of March 31, 2021, will be eligible to be considered under the Restructuring Resolution Framework 2.0.

Those who have opted for the first resolution can have residual tenure extended to two years and lenders can review working capital sanction limits for those borrowers, the RBI governor has said. The restructuring under the proposed framework can be invoked until September 30 and will have to be implemented within 90 days of the invocation.

The central bank has announced a term liquidity facility of Rs 50,000 crore for access to emergency health security. This facility will be made available to banks at the Repo Rate with up to three-year tenure till March 31, 2022. The funds under the facility can be deployed to borrowers to help ramp up hospital amenities and other healthcare facilities. 

Das has also announced special long-term repo operations for small finance banks (SFBs) to provide further support to MSME and other unorganised-sector entities. SFBs will also be permitted to lend to small microfinance institutions having an asset size of Rs 500 crore. The RBI will conduct a special, three-year Long-Term Repo Operation (LTRO) of Rs 10,000 crore at the Repo Rate for SFBs. There will be a limit of Rs 10 lakh per borrower, and the facility will be available till October 31, 2021.

The industry at large has welcomed the announcement by the RBI, especially the one-time restructuring and extension of moratorium is definitely a welcome relief to an already stressed sector. 

Aashit Shah, partner at J Sagar Associates said that the measures announced today are a big positive for MSMEs and small businesses that have been adversely impacted by the second wave of the pandemic. "They will also provide much-needed liquidity to the emergency healthcare sector to battle the proliferating spread of the virus," he said.