RBI announces Rs. 16,000 Crore Special Liquidity Facility for SIDBI

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Biznextindia : RBI Governor shaktikant Das on Friday announced that the central bank will extend a special liquidity facility of Rs 16,000 crore to SIDBI for on-lending and refinancing. The facility will be available at prevailing repo rate for a period of 1 year.

“In order to meet MSMEs’ short- and medium-term credit needs to kick start the investment cycle with additional focus on smaller MSMEs and businesses including those in credit deficient and aspirational districts, it has been decided to provide a further special liquidity facility of Rs.16,000 crore to SIDBI. The facility would be extended for on-lending / refinancing through novel models and structures including double intermediation, pooled bond / loan issuances, etc. The facility will be available at the prevailing policy repo rate for a period of up to one year. The Reserve Bank may consider further extension of the facility depending on its usage” he said.

To nurture the embryonic growth impulses of the economy, the Reserve Bank extended fresh support of Rs.50,000 crore on April 7, 2021 to All India Financial Institutions (AIFIs) for new lending in 2021-22. This included a special liquidity facility (SLF) of Rs.25,000 crore to National Bank for Agriculture and Rural Development (NABARD) to support agriculture and allied activities, the rural non-farm sector and non-banking financial companies-micro finance institutions (NBFC-2MFIs), an SLF of Rs.10,000 crore to the National Housing Bank (NHB) to support the housing sector and Rs.15,000 crore to the Small Industries Development Bank of India (SIDBI) to meet the funding requirements of micro, small and medium enterprises (MSMEs).

 

On-tap Liquidity Window for Contact-intensive sectors

On May 5, 2021, it was 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 to boost provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country. It has now been decided to open a separate liquidity window of Rs. 15,000 crore with tenors of up to three years at the repo rate till March 31, 2022 for certain contact-intensive sectors i.e., hotels and restaurants; tourism – travel agents, tour operators and adventure/heritage facilities; aviation ancillary services – ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organisers, spa clinics, and beauty parlours/saloons. Banks are expected to create a separate COVID loan book under the scheme. By way of an incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book, created under this scheme, with the Reserve Bank under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse 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 this incentive.

 

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