In order to boost the provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country, the Reserve Bank of India on Friday decided to open an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate till March 31, 2022.
The on-tap liquidity window for healthcare infrastructure was announced by the RBI governor on May 5 when he announced several other measures as part of a Covid relief package.
Under the scheme, banks will provide fresh lending support to a wide range of entities including vaccine manufacturers; importers/suppliers of vaccine and priority medical devices; hospitals/dispensaries; pathology labs and diagnostic centres; manufacturers and suppliers of oxygen and ventilators; importers of vaccines and COVID-related drugs; COVID-related logistics firms and also patients for treatment.
Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector lending (PSL) classification to such lending up to March 31, 2022. These loans will continue to be classified under PSL till repayment/maturity, whichever is earlier.
Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI.
Under the scheme, banks are expected to create a COVID loan book. By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate.
Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above will also be eligible for the incentives.
The RBI has decided that the on-tap scheme will remain operational from May 7, 2021 till March 31, 2022. All banks eligible under the Liquidity Adjustment Facility (LAF) can participate in the scheme.
Besides, requests from banks desirous of availing funds from the RBI will be subject to availability of funds as on the date of application, i.e., funds cannot be guaranteed in case the total amount of Rs 50,000 crore is already availed.
Furthermore, it has been decided that banks would need to lend such funds within a reasonable period, i.e., not later than 30 days from the date of availing the funds from the RBI. There is no tenor restriction regarding lending by banks under the scheme. However, the banks will have to ensure that the amount borrowed from the RBI should at all times be backed by lending to the specified segments till the maturity of the scheme.
Also under the scheme banks would be allowed to park their surplus liquidity up to the size of the COVID loan book in a special 14-day reverse repo window.