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RBI allows banks to provide liquidity support to Covid-affected sectors

The Reserve Bank of India (RBI) has finally come to the rescue of the country's travel and tourism, hospitality and aviation sectors, which were worst affected in the wake of the Covid-19 pandemic.

RBI allows banks to provide liquidity support to Covid-affected sectors
Representative Image


The RBI has allowed banks to provide fresh lending support upto Rs 15,000 crore to these segments of the economy at a lower interest bearing repo rate of 4 per cent currently.

RBI Governor Shaktikanta Das said that the on tap facility will help mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors.

A separate liquidity window of Rs 5,000 crore is opened till March 31, 2022, with tenors of up to three years at the repo rate, an RBI statement said.

Under the scheme, banks can provide fresh lending support to 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/salons, the statement added.

In order to incentivise banks for this liquidity offering to affected sectors, the RBI has allowed them to park their surplus liquidity up to the size of the loan book created under this scheme with the central bank under the reverse repo window at a rate  which is 25 bps lower than the repo rate.

This will offer banks an interest rate which is still 40 bps higher than the reverse repo rate on their surplus funds.

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