- RBI announced priority lending by banks for Hospitals, oxygen suppliers, vaccine importers, and Covid medicines.
- The announcement was made by RBI Governor Shaktikanta Das during his virtual speech.
- The governor also stated that the RBI will keep a close eye on the emerging developments in the economy.
The Reserve Bank of India (RBI) Governor Shaktikanta Das has declared ‘on tap liquidity’ to the general public in order to provide liquidity support and boost the public’s support base in the fight against the Covid-19 pandemic. The loan will be offered at the RBI’s repo rate, which is currently 4%. The loan will have a tenor of up to three years and on tap loan will be available until March 31, 2022.
He also added that banks would establish a COVID-19 loan book to treat this as priority sector lending.
According to the Governor, the RBI will conduct a special three-year SLTRO of $10,000 crore at repo rate for small finance banks, which will now lend up to ten lakh per borrower. He added that the SLTRO facility will be open until October 31, 2021.
Mr. Das said that the Reserve Bank of India is prepared to fight for financial stability.
The RBI Governor, Shaktikanta Das made the announcement while delivering his virtual speech. He said that while the global economic outlook is unpredictable, the effect of Covid-19 on national inflation is lower than the first wave.
He said that India had flattened the COVID-19 infection curve in March, but a new virus mutant had emerged since then. Against the spread of the second wave of Covid, he said, wide and swift actions are needed.
Shaktikanta Das also said that India’s manufacturing sector is one of the least affected, and that the country’s economy will recover quickly once the pandemic is stabilised.
Governor Shaktikanta Das reportedly met with bankers and shadow lenders ahead of his speech to discuss the current economic condition, possible stress to balance sheet, credit flows, and liquidity.
By lowering interest rates, the RBI has supported the Modi government’s fiscal support initiatives with loan holidays and cash infusions. India’s central bank has vowed to keep monetary policy loose, despite the fact that inflation fears have limited its options.
The Covid-19 virus has wreaked havoc in India in recent weeks. Industry groups are putting pressure on Prime Minister Narendra Modi to enforce lockdowns to stop the spread of the virus, which he has so far refused to do in order to prevent the economic damage that occurred last year.
The governor stated that the RBI will keep a close eye on the economy’s current developments.