Liquidity window for emergency health services extended till June 30

By Piyush Shukla

The Reserve Bank of India (RBI) on Thursday proposed to extend the Rs 50,000 crore on-tap liquidity window for emergency healthcare services till June 30.

The central bank had introduced the liquidity window at the repo rate with tenors of up to three years on May 5 last year to provide immediate capital for ramping up Covid-19 related healthcare infrastructure and services.

Banks were also incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending, the RBI said, adding that lenders were expected to create a Covid-19 loan book under the scheme. As an additional incentive, such banks were also eligible to park their surplus liquidity, up to the size of their Covid-19 loan book, with the RBI under the reverse repo window at a rate that is 25 basis points lower than the repo rate.

Till February 4, lenders deployed their own funds amounting to Rs 9,654 crore towards Covid-19-related emergency health services, RBI said. “In view of the response to the scheme, it is now proposed to extend this window up to June 30, 2022 from March 31, 2022, as announced earlier,” it said.

Separately, the central bank has also extended the Rs 15,000 crore liquidity window for certain contact-intensive sectors till June-end from March-end earlier. It had launched this scheme on June 4, under which loans would be extended at repo rate with tenors of up to three years. Banks were incentivised by being allowed to park their surplus liquidity up to the size of their Covid-19 loan book created under the scheme.

“Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending were also eligible for this incentive. Banks have deployed their own funds to the tune of Rs 5,041 crore (up to February 4, 2022) to the entities under contact intensive sector. In view of the response to the scheme, it is now proposed to extend this window up to June 30, 2022,” the central bank said.

RBI Governor Shaktikanta Das on Thursday also sounded caution over the impact of the pandemic on banking and non-banking finance companies (NBFCs) “when the effects of regulatory reliefs and resolutions fully work their way through”.

“Banks and other financial entities would be well advised to further strengthen their corporate governance and risk management strategies to build resilience in an increasingly dynamic and uncertain economic environment. They also need to continue the process of capital augmentation and building up of appropriate buffers,” he said.