RBI Steps in to Ease COVID-19 Burden
Part of: GS Prelims and GS – III – Economy
- The RBI Governor has announced a series of measures to support the nation’s fight against the second wave of COVID-19 infections.
- Term Liquidity Facility of Rs. 50,000 crore with tenure of up to 3 years, at repo rate, to ease access to emergency health services, for ramping up COVID-related health infrastructure & services.
- Special Long Term Repo Operations for Small Finance Banks (SFBs): In order to provide further support to micro, small and other unorganized sector entities, 3-year repo operations of Rs. 10,000 crore at repo rate, for fresh lending up to Rs 10 lakh per borrower (till 31 October, 2021)
- Lending by SFBs to MFIs to be classified as priority sector lending: In view of fresh challenges, SFBs are now permitted to regard fresh on-lending to MFIs with asset size up to Rs. 500 crore, as priority sector lending (till 31 March, 2022)
- Credit flow to MSME Entrepreneurs: To incentivize inclusion of unbanked MSMEs into banking system, exemption provided in February, 2021 wherein scheduled banks were allowed to deduct credit given to new MSME borrowers from Net Time & Demand Liabilities for calculation of CRR, is now extended to December 31, 2021.
- Rationalization of KYC norms for enhanced customer experience: Steps being proposed include –
- Extending scope to video KYC for new customer categories such as proprietorship firms,
- Conversion of limited KYC accounts to fully KYC compliant accounts,
- Introduction of more customer-friendly options in KYC updating and
- enabling the use of KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP and submission of electronic documents as identity proof
- Floating Provisions and Countercyclical Provisioning Buffer: Banks can now use 100% of floating provisions held by them, as on December 31, 2020, for making specific provisions for NPAs; (till March 31, 2022)
- Relaxation of overdraft facility for states: Maximum number of days of overdraft in a quarter for state governments has been increased from 36 to 50 days.