RBI offers booster dose to support health sector

The Reserve Bank of India (RBI) on Wednesday took a series of liquidity-boosting and loan-relief measures to aid broad swathes of the economy walloped by the second wave of the covid-19 pandemic. Governor Shaktikanta Das said RBI will make available an on-tap liquidity window of ?50,000 crore, with a tenor of up to three years, under which banks can provide fresh lending support to a wide range of entities, including vaccine makers, importers of vaccines, covid-related drugs and priority medical devices, hospitals, pathology labs, manufacturers and suppliers of oxygen and ventilators, logistics firms and also to patients for treatment. This facility, which will be offered at the repo rate, will be available till 31 March 2022. The steps are likely to help the stressed healthcare industry expand facilities to treat more patients amid the rampaging second wave. With thousands of sick people seeking treatment, hospitals are overwhelmed and are running out of medical-grade oxygen. Vaccines and key medicines are in short supply, as are lifesaving medical equipment such as ventilators and oxygen concentrators. RBI also allowed the restructuring of loans to retail borrowers and small businesses up to ?25 crore without being classified as non-performing assets. Restructuring under the proposed framework may be invoked up to 30 September and will have to be implemented within 90 days after the invocation, it said. Under the special liquidity window, RBI said all loans given will be classified as priority sector loans till repayment or maturity. Bank can disburse these loans to borrowers directly or through intermediaries regulated by RBI. Das said that banks are expected to create a covid loan book under the scheme. By way of an incentive, banks can park their surplus liquidity up to the size of the covid loan book with RBI under the reverse repo window at 40 basis points higher than the reverse repo rate. For instance, if a bank has lent ?500, it can earn 3.75% on the liquidity parked in the reverse repo window. Analysts said direct support to the identified sectors will help generate total output demand of roughly ?80,000 crore, as the macro impact of the scheme can be gauged from the fact that a ?50,000 crore liquidity boost is roughly 9% of the total health expenditure of ?6 trillion in 2019-20.

Das also announced the second purchase of government securities worth ?35,000 crore under the government securities acquisition programme (G-SAP) on 20 May. RBI had announced the ?1 trillion G-SAP 1.0 in the monetary policy in April. Under this scheme, the first tranche of ?25,000 crore was conducted on 15 April. “G-SAP has engendered a softening bias in G-Sec yields, which has continued since then," Das said. “With system liquidity assured, RBI is now focusing on increasingly channelizing its liquidity operations to support growth impulses, especially at the grass-root level," he added. Small finance banks (SFBs) are another segment that received special attention. The central bank has offered liquidity support of ?10,000 crore under a special three year long-term repo operation (SLTRO) at repo rate. These banks can on-lend the money taken under this window up to ?10 lakh per borrower. This facility will be available till 31 October. RBI has further incentivized SFBs by allowing loans to microfinance institutions (MFIs) be classified under priority sector. “In view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to smaller MFIs (with asset size of up to ?500 crore) for on-lending to individual borrowers as priority sector lending. This facility will be available up to 31 March 2022," Das said. Over the last few days, Das had held a series of meetings with representatives from banks, non-banking financial companies (NBFCs), SFBs and MFIs on the coronavirus crisis. “Some of the targeted lending programmes are meant to give liquidity to specific sectors and incentivize banks to lend in the direction. Banks could have been conservative in terms of lending to small borrowers in these times. By classifying loans to smaller NBFC-MFIs as a priority sector, RBI has opened liquidity option for them and risk incentive to banks to lend to these entities and indirectly to their borrowers," said Rajeev Yadav, chief executive officer, Fincare Small Finance Bank.

Mint, 6th May 2021.

Data storage norm splits digital payments industry

Data storage norm splits digital payments industry India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move. In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET. “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week. RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...

Sebi to finalise options in commodities today

The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...

E tailers global warehouses may come under tax net

E tailers global warehouses may come under tax net Warehouses of e-commerce companies based in countries such as Australia, Japan, Italy, Spain, the Netherlands, and Russia may not be exempted from paying the income tax in India once the multilateral instrument (MLI) to prevent base erosion and profit shifting (BEPS) comes into force. BEPS refers to the reporting framework mooted by the Organisation for Economic Co-operation and Development (OECD) and signed by over 100 countries, including India, to prevent exploiting gaps and mismatches in tax rules to shift profits by multinational companies (MNCs) artificially to low-tax regimes. The representatives of 68 countries on June 7 this year signed an agreement (MLI) in Paris to amend their tax treaties to bring them in alignment with measures to prevent BEPS. However, there is still time for synchronising tax treaties with the multilateral instrument. India has submitte...

CA Online

Search This Blog