RBI Allows Second Window for Loan Restructuring to Individual, Small Borrowers; Provides Rs50,000 Crore to Healthcare Infrastructure
The Reserve Bank of India (RBI) on Wednesday decided to provide a window for restructuring to individual and small borrowers having a loan of up to Rs25 crore if it was not availed earlier. Further, the central bank announced Rs50,000 crore liquidity for ramping up COVID-related healthcare infrastructure and services till March 2022.
In a web address, RBI governor Shaktikanta Das says, "Individuals, borrowers and micro, medium and small enterprises ( MSMEs) with aggregate exposure up to Rs25 crore, who have not availed restructuring under any previous frameworks, who were classified as standard on 31 March 2021, will be eligible to be considered under Resolution Framework 2.0. Restructuring under new framework can be invoked till 30 September 2021 and will have to be implemented within 90 days after invocation."
"For individuals and small businesses who have availed restructuring of loans under resolution framework 1.0, where moratorium of less than two years was permitted, lending institutions can now increase the period and/or extending residual tenure up to a total of two years. In respect of small businesses and MSMEs restructured earlier, lending institutions are now permitted to review working capital sanction limits, as a one-time measure," Mr Das says.
According to Krishnan Sitaraman, senior director of CRISIL Ratings, unlike the asset-quality stress cycle five years back, which involved large corporates, this time around, smaller accounts, especially MSME and retail, are more vulnerable to the pandemic's second wave. "The RBI's moves are targeted accordingly. A one-time restructuring for individual borrowers and MSMEs; and allowing lenders to offer a more supportive repayment structure under last year's restructuring package," he says.
The central bank has also decided to provide term liquidity facility of Rs50,000 crore for ramping up healthcare infrastructure. 
Under the scheme, RBI says banks can provide fresh lending support to a wide range of entities including vaccine manufactures; importers or suppliers of vaccines and priority medical devices; hospitals/dispensaries; pathology labs; manufactures and suppliers of oxygen and ventilators; importers of vaccines and COVID-related drugs; logistics firms and also patients for treatment.

RBI says, "Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending up to 31 March 2022. These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier. Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI. Banks are expected to create a COVID loan book under the scheme. By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book with the RBI under the reverse repo window at a rate which is 25 basis points (bps) lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate."
RBI also announced special long-term repo operations for small finance banks (SFBs). The central bank will provide further support to micro, small and other unorganised sector entities, a three-year repo operation of Rs10,000 crore at repo rate, for fresh lending up to Rs10 lakh per borrower. This facility will be available up to 31 October 2021, the RBI says.
Mr Sitaraman from CRISIL says, "Incentivising SFBs to lend to MFIs, which typically face higher borrower vulnerability, is salutary. What helps is that 8 out of 11 SFBs were MFIs previously, so they would be in a better position to evaluate the credit profiles of the smaller MFIs and lend. Secondly, extending the priority-sector lending eligibility to MFIs with asset size up to Rs500 crore will encourage flow of credit to smaller MFIs, which have been facing relatively bigger funding-access challenges. This move will cover around half of the NBFC-MFIs in India."
In view of fresh challenges, Mr Das says, small finance banks are now permitted to regard fresh on-lending to micro-finance institutions (MFIs) with asset size up to Rs500 crore, as priority sector lending, and this facility will be available up to 31 March 2022.
The RBI governor says, "To further incentivise inclusion of unbanked MSMEs into banking system, exemption provided in February 2021 where scheduled banks were allowed to deduct credit given to new MSME borrowers from net time and demand liabilities (NTDL), is now extended to 31 December 2021."

Mr Das, the governor says, "Over a year now, we have struggled to free ourselves from the pandemic’s deadly grip. Between mid-September and February, as a country, we did manage to lower infections at a time when the rest of the world was reeling under malevolent surges of the virus. This time around, we have to marshal our resources and fight it again with renewed vigour, ignited by the determination to overcome, and to return to normalcy and sound health."

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