Bikky Khosla | 11 May, 2021
In a welcome move, the RBI last week announced a series
of liquidity measures to combat economic turbulence unleashed
by the resurgence of Covid-19. They include, amid others, an on-tap
liquidity window of Rs 50,000 crore to set up Covid-related
healthcare infra, a second tranche of Rs 35,000 crore under government
securities acquisition programme, and a 3-year special long-term repo
operations of Rs10,000 crore for small finance banks.
It is also noteworthy that the central
bank unveiled a new resolution framework for Covid-related stressed assets of
individuals, small businesses and MSMEs. Under this new arrangement, small
businesses and MSMEs not availing restructuring earlier and having
aggregate exposure of up to Rs 25 crore will be eligible to be
considered subject to certain conditions, while in respect to those restructured
earlier, banks have been permitted to review the
working capital sanctioned limits.
These liquidity-pushing measures are encouraging as
they will definitely ease
liquidity concerns of our businesses and entrepreneurs, thus instilling a sense
of security among them, but these measures need to be supplemented by the
Centre and states. The vaccination drive must be ramped up and the Centre and
states must come together to fight against the pandemic -- for
lives of citizens -- and at the same time to safeguard the economy.
Meanwhile, bank credit growth has
started to show a concerning trend. It hit a record low of
5.6% in fiscal 2020-21, and according to recent data published by the RBI, slipped
further in April. Amid the pandemic situation, while health
crisis and related lockdowns are hitting credit demand, banks -- with their
work coming to a bare minimum -- are turning
more cautious as well. Amid this situation, the latest announcements by the RBI
I invite your opinions.