- Small finance banks on-lending to microfinance institutions (MFIs) would be considered as priority sector lending amid the ongoing COVID-19 pandemic till FY22 end.
- Banks are incentivized to lend to weak sectors. They can create a COVID loan book in their balance sheets. An equal amount can be parked at the RBI with 40bps above reverse repo rate.
- To support vaccine manufacturers, medical facilities, hospitals, and patients, on-tap liquidity of Rs 50k crore is set up and is open till FY22 end.
- The second purchase of G-Sec for Rs 35,000 cr under G-SAP 1.0 will be conducted on May 20. G-SAP is contributing to softening of G-Sec yields, and in turn, private sector borrowing in the market.
- Regarding inflation, the governor believes that it may not vary much with the projection made at its April monetary policy committee meeting. Normal monsoon should help contain food price pressures, especially in cereals and pulses. However, the inflation for the year would depend on the COVID restrictions and the impact on supply chains and logistics.
- It also decided to conduct a special three-year long-term repo operation (SLTRO) of Rs 10,000 crore at repo rate for the SFBs. The amount is to be deployed for fresh lending of up to Rs 10 lakh per borrower. This facility will be available till October 31, 2021.
- It announced relaxation in overdraft (OD) facility for state governments. The maximum number of days of OD in a quarter is increased from 36 to 50 days and the number of consecutive days of OD from 14 to 21 days.
- Banks are allowed to utilize 100% of floating provisions/counter-cyclical provisioning buffer held by them as of December 31, 2020, for making specific provisions for NPAs with prior approval of their Boards. Utilization is permitted with immediate effect and up to FY22 end.
- The global economy is exhibiting signs of recovery supported by fiscal and monetary stimulus. But the outlook is highly uncertain and clouded with risks. World merchandise trade has maintained its decent uptrend and global financial markets have regained buoyancy in April on the back of vaccine optimism.
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