To cushion the pandemic's blow to the economy, RBI Governor Shaktikanta Das on Wednesday announced certain support measures, including giving individuals and small borrowers more time to repay debt and allowed banks to give priority loans to vaccine makers, hospitals and COVID-related health infrastructure.
The RBI’s move to extend Rs 50,000 crore credit facility to healthcare infrastructure and vaccine manufacturers in the wake of the second COVID-19 wave will ensure availability of liquidity and address immediate funding need to scale up operations, experts said on Wednesday.
However, ICRIER-RBI Chair Professor Alok Sheel also highlighted the extensive income support through large fiscal packages given by advanced economies to deal with the adverse impact of lockdowns, which helped these countries to get back on their feet.
To cushion the pandemic’s blow to the economy, RBI Governor Shaktikanta Das on Wednesday announced certain support measures, including giving individuals and small borrowers more time to repay debt and allowed banks to give priority loans to vaccine makers, hospitals and COVID-related health infrastructure.
KPMG in India Partner and Head – Financial Risk Management Rajosik Banerjee said, “This will ensure availability of liquidity and address immediate funding need to scale up operations to deal with the second wave of COVID-19 surge on an instantaneous basis”.
ICRIER’s Sheel further said the governor, in his statement, indicated that the Reserve Bank of India is working in close cooperation with the government. The question that naturally arises is whether there would be a similar statement from the government outlining fiscal support during these trying times.
“Indeed, one would have expected that in these circumstances the first line of support would be fiscal.
“It may be recalled that during the first wave too the fiscal support was very limited, with the bulk of the support being made in the form of liquidity support and credit despite the fact that that a large number of poor people had lost their sources of livelihood on account of the stringent lockdown,” Sheel added.
Advanced economies that had imposed similar lockdowns had provided extensive income support through large fiscal packages that were the flipside of the lockdowns, Sheel noted.
“This is the reason why these economies are now well placed to get back on their feet, as pointed out by the Governor. Perhaps it is the inability of the government to provide such fiscal support that underlies the decision not to impose a general lockdown despite the advice given by a number of medical experts,” Sheel said.
Just as the economy appeared to be inching back to normalcy, India was hit by a second wave of infections in early April, prompting states and cities to restrict public movements and impose lockdowns, which have hit some businesses hard.
India added 3,82,315 virus cases over the last 24 hours to reach a total of 2.06 crore, while death rose by a record 3,780 to 2,26,188, according to the Union Health Ministry data updated on Wednesday.
Essar Capital Senior Managing Director Sanjay Palve said the priority right now is to save lives and the on-tap liquidity facility of Rs 50,000 crore to ease access to emergency health services is just what the country needs.
J Sagar Associates Partner Aashit Shah said additional restructuring guidelines for MSMEs, small businesses and individuals will assist them tide over the uncertainties caused due to the second wave. These guidelines as well as the recently introduced pre-arranged insolvency resolution process will enable MSMEs to restructure their debts without the looming fear of losing or liquidating their businesses.
Acuite Ratings & Research Chief Analytical Officer Suman Chowdhury said the RBI’s measures will support the availability of credit to the healthcare sector, which needs to ramp up significantly to address the COVID 2.0 challenges. Secondly, the restructuring option has been extended till September 2021 for retail and MSME borrowers with loans up to Rs 25 crore.
Satin Creditcare Network Chairman and Managing Director HP Singh said the targeted long-term repo operation for small finance banks of up to Rs 10,000 crore and lending to smaller microfinance institutions of asset size up to Rs 500 crore under priority sector is a timely and prudent announcement and reflects the efforts towards financial inclusion and access to liquidity in these times of stress.
“While the outlook for the global economy still looks uncertain, with the growth-focused measures undertaken by the government, we expect the financial conditions to ease up owing to the meaningful deployment of ample funds,” Singh added.