Context: The Reserve Bank of India on Wednesday announced a host of measures to boost fund flow to the healthcare sector amid the raging second wave of the Covid pandemic.RBI Governor Shakikanta Das announced, that to ramp up the Covid related healthcare infrastructure in the country, an on-tap special liquidity facility of Rs 50,000 crore will be made available to the banks at the repo rate which is 4% - with up to 3-year tenor till March 31, 2022.He also announced special long-term repo operations for small finance banks to provide further support to micro, small and other unorganized sector entities. The small finance banks will be permitted to lend to small microfinance institutions having an asset size of Rs 500 crore.The central bank will conduct a special 3-year long-term repo operation of Rs 10,000 crore at repo rate for SFBs. There will be a limit of Rs 10 lakh per borrower and the facility will be available till October 31, 2021.On The Big picture today, we will analyse with experts in detail the Covid-related measures announced by the RBI and how significant will they be in limiting the economic damage due to the second wave of Covid infections.
Key Measures

• The loan will be available at the RBI's Repo Rate, i.e. 4 per cent. The tenor of the loan will be up to 3 years and on tap loan will be available till 31st March 2022.

"To boost provision of immediate liquidity for ramping up COVID related healthcare infrastructure and services in the country, an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate is being opened till March 31, 2022.

• Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufactures;
• importers/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.
• The Central Bank of India has pledged to keep monetary policy loose though its room to act has been constrained by inflation concerns.

• Lending by Small Finance Banks (SFBs) to MFIs for on-lending to be classified as priority sector lending: In view of fresh challenges, SFBs are now permitted to regard fresh on-lending to MFIs with asset size up to Rs. 500 crore, as priority sector lending. This facility will be available up to 31 March, 2022.
• Credit flow to MSME Entrepreneurs: To further incentivize inclusion of unbanked MSMEs into banking system, exemption provided in February, 2021 wherein scheduled banks were allowed to deduct credit given to new MSME borrowers from Net Time & Demand Liabilities for calculation of CRR, is now extended to December 31, 2021.

Rationalization of KYC norms for enhanced customer experience: Steps being proposed include –

• Extending scope to video KYC for new customer categories such as proprietorship firms,
• Conversion of limited KYC accounts to fully KYC compliant accounts,
• Introduction of more customer-friendly options in KYC updating and
• enabling the use of KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP and submission of electronic documents as identify proof

Floating Provisions and Countercyclical Provisioning Buffer: Banks can now use 100% of floating provisions held by them, as on December 31, 2020, for making specific provisions for NPAs; such utilization is permitted up to March 31, 2022.
Relaxation of overdraft facility for states: Maximum number of days of overdraft in a quarter for state governments has been increased from 36 to 50 days. The number of consecutive days of OD has been increased from 14 to 21 days; facility available up to September 30, 2021.