RBI Announces Term Liquidity Facility of Rs. 50,000 Crore For Healthcare

The Reserve Bank of India (RBI) Governor Shaktikanta Das has announced a Covid-19 healthcare package of Rs 50,000 crore, for lending to entities such as vaccine makers, medical equipment suppliers, hospitals and related sectors, besides the patients in need of funds for treatment.

About the Covid-19 healthcare package: 

• The new on-tap special liquidity facility of Rs 50,000 crore will be made available to the banks at the repo rate, for access to emergency health security amid the economic stress due to the second wave of Covid-19 in India.
• Banks can give loans under this facility till March 31, 2022. This Covid loan will be provided for a tenure of up to 3 years and will be classified as a priority sector loan till repayment or maturity.

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About the Covid loan book mechanism

• Besides, a Covid loan book mechanism has also been announced for banks, where banks will have an option to place an equivalent amount as lend to borrowers, with RBI at the reverse repo rate plus 40 basis points.
• This means that if banks lend Rs 50,000 crore to the borrowers and the equivalent amount of Rs 50,000 crore of surplus funds of the system is put in the reverse repo with RBI, they can earn 3.75 per cent instead of 3.35 per cent.

About the long-term repo operation (LTRO)

A special long-term repo operation (LTRO) has been announced for small finance banks (SFBs) worth Rs 10,000 crore, to provide further lending support to NBFC-microfinance institutions (MFIs) and other MFIs (Societies, Trusts etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’. These MFIs must have an asset size of Rs 500 crore, as of 31 March 2021.

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