On Friday, May 7 RBI issued the operational details of the on-tap term liquidity facility to ease access to the emergency health services scheme.
Previously, on Wednesday, May 5, RBI Governor Shaktikanta Das announced various measures aimed at lessening the financial stress in the economy. The announcements, which came at a time of economic uncertainty, are designed to boost the flow of funds to the healthcare sector and to defend small & medium businesses and individual borrowers from the unfavourable impact of the second wave of COVID-19 across the country.
The central bank has provided an on-tap liquidity window, allowing banks to borrow ₹50,000 crores with a tenure of up to three years at the repo rate till March 31, 2022, to promote the requirement of fast liquidity for ramping up Covid-related healthcare infrastructure and services in the country.
Operational details to avail on-tap term liquidity facility services are as under:
(1) The scheme will remain operational from May 07, 2021, till March 31, 2022.
(2) All banks eligible under the Liquidity Adjustment Facility (LAF) can participate in the Scheme.
(3) Requests from banks desiring 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 ₹50,000 crores are already availed.
(4)Besides, banks should aim to lend 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 constraint regarding lending by banks under the scheme. However, the banks will have to ensure that the amount borrowed from RBI should at all times be backed by lending to the specified segments till the maturity of the scheme.
(5) The Scheme will be operationalised on tap. Banks can set requests for funds in the format through e-mail. In case the requested amount exceeds the remaining amount under the scheme on the date of operation, the remaining amount will be given on a pro-rata basis among all the eligible requests.
(6) The Reserve Bank reserves the right to decide the quantum of distribution and accept or reject any or all the applications, either wholly or partially, without assigning any reason thereof.
(7) The requesting bank must ensure that a sufficient amount of securities is available in its Repo constituent account on the date of operation.
(8) 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.
(9) Banks are being incentivised for quick delivery of credit under the scheme through the extension of priority sector lending (PSL) classification to such lending up to March 31, 2022.
(10) Banks desirous of deploying their resources without availing funds under the scheme for lending to the specified segments mentioned above would also be eligible for the additional incentives.