RBI announces loan restructuring for individuals, MSMEs hit by COVID-19; eases KYC norms

RBI Governor Shaktikanta Das said food and fuel inflation have pushed core inflation, adding that the expected normal monsoon forecast should ease the prevalent condition

FP Staff May 05, 2021 12:41:06 IST
RBI announces loan restructuring for individuals, MSMEs hit by COVID-19; eases KYC norms

File photo of RBI governor Shaktikanta Das. Reuters

Reserve Bank of India on Wednesday announced a slew of measures including loan restructuring for individual and small businesses hit hard by a fresh COVID-19 wave.

To augment the supply of goods for COVID care, the central bank opened Rs 50,000 crore on-tap window to ease access to emergency health services to boost the provision of immediate liquidity for ramping up COVID-19 related healthcare infrastructure and services in the country.

"Banks are being incentivised for quick delivery of credit under the scheme, through the extension of priority sector classification to such lending and these loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier," RBI Governor Shaktikanta Das said an unscheduled press briefing.

This liquidity window is being opened till 31 March, 2022, he said, adding that under the scheme, banks can provide fresh lending support to a wide ranging of entities including vaccine manufacturers, importers and suppliers of vaccine and medical devices, hospitals and dispensaries and suppliers of oxygen and ventilators importers and also patients for treatment.

With regard to restructuring, Das said, borrowers that are individuals and micro, small and medium enterprises (MSMEs) having aggregate exposure of up to Rs 25 crore would be considered for the new scheme.

This would be for those who have not availed restructuring under any of the earlier frameworks, including the Resolution Framework 1.0 of RBI dated 6 August, 2020, and who are classified as standard as on 31 March, 2021, shall be eligible for the Resolution Framework 2.0, he said.

Under the proposed framework, the restructuring may be invoked up to 30 September, and shall have to be implemented within 90 days after the invocation, he added.

RBI has also introduced Rs 10,000 crore special long-term repo operation for small finance banks. Under this, loans up to Rs 10 lakh to MSMEs will be considered as priority sector lending, Das said.

Das also announced relaxation in overdraft facility for state governments to enable them to better manage their fiscal situation in terms of their cash flows and market borrowing.

Now the maximum number of days of overdraft has been increased from 36 to 50 days.

RBI also announced rationalisation of certain components of the extent know-your-customer (KYC) norms for enhancing customer convenience.

These include extending the scope to video KYC known as the video-based customer identification process, he said.

Further, keeping in view the COVID-19 related restrictions in various parts of the country, RBI regulated entities have been asked that for the customer accounts where periodic KYC updating is new or pending, "no punitive restriction on operation of customer accounts" will be imposed till 31 December, 2021, unless warranted, due to any other reason.

The Reserve Bank also asked banks and other regulated financial entities not to impose any punitive restriction against customers for failure to update KYC till December end, in view of the second wave of coronavirus cases.

The RBI has also decided to extend the scope of video KYC (know-your-customer) or V-CIP (video-based customer identification process) for new categories of customers such as proprietorship firms, authorised signatories and beneficial owners of legal entities.

"Keeping in view the COVID-related restrictions in various parts of the country, Regulated Entities are being advised that for the customer accounts where periodic KYC updating is due/pending, no punitive restriction on operations of customer account(s) shall be imposed till December 31, 2021," Das said while announcing steps to deal with the COVID pandemic.

Henceforth, banks or regulated entities will not impose punitive restrictions on customers unless warranted due to any other reason or under instructions of any enforcement agency or court.

In his address, Das stressed that RBI stands in "battle readiness" to ensure that financial conditions remain congenial and markets continue to work efficiently.

"We will work in close coordination with the government to ameliorate the extreme travails that our citizens are undergoing in this hour of distress. We are committed to go unconventional and devise new responses as and when the situation demands. We must also stay focused on our future, which appears bright even at this juncture, with India set to emerge as one of the fastest-growing economies in the world," he said.

RBI on Wednesday said the second purchase of government securities worth Rs 35,000 crore under the G-sec Acquisition Programme (G-SAP 1.0) will be done on 20 May for an orderly evolution of the yield curve as a fresh COVID-19 wave threatens to hit the economy.

The first purchase of Rs 25,000 crore last month received an enthusiastic response from the market, Das said.

RBI will do second purchase of government securities (G-secs) aggregating Rs 35,000 cr in two weeks, he said.

To provide clarity on its bond-buying programme through open market operations (OMO), Das had announced Rs 1 lakh crore target for the first quarter under the new instrument called G-SAP 1.0.

On the rate of price rise, he said, food and fuel inflation have pushed core inflation. The expected normal monsoon forecast should help contain food price inflation, he added.

The RBI Governor said the central bank will continue to monitor the situation from the resurgence of COVID-19 cases and deploy all resources. 

"We have to marshal our resources for fighting the virus with vigour," Das said.

With inputs from PTI

Updated Date:

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