Liquidity window of Rs. 15,000 cr?

Announcing additional measures to help ailing businesses, the Reserve Bank of India (RBI) announced a separate on-tap liquidity window of Rs. 15,000 crore for contact-intensive sectors like restaurants, hotels and those involved in the tourism sector, among others.

Manas Dwivedi

The Reserve Bank of India (RBI) has announced a slew of liquidity measures, including a Rs. 15,000 crore liquidity window with tenors of up to three years at the repo rate till March 31, 2022 for contact-intensive sectors like hotels and tourism. RBI has also increased the coverage of borrowers under the resolution framework scheme by enhancing the maximum exposure limit from Rs. 25 crore to Rs. 50 crore for MSMEs, small businesses and loans to individuals for business purposes.

Under the scheme, banks can provide fresh lending support to hotels, restaurants, tourism and tour operators, adventure and heritage facilities, aviation ancillary services (ground handling and supply chains) and other services that include private bus operators, car repair services, rent-a-car service providers and event/conference organisers. The scheme will remain operational from June 7 till March 31, 2022.

Welcoming the decision, the travel trade expressed joy over the apex bank’s decision. Rajiv Mehra, President, IATO, said, “We welcome the announcement by the RBI offering loans to the tourism and hospitality sector on easy terms and lower rate of interest. Hope tour operators who have had almost zero income for more than one year, would get some succour out of it. Also, we would request the government to announce SEIS (Service Export Incentive Scheme) which is now pending for the financial year 2019-20. Besides, we expect some grant for revival of the battered tourism sector and rationalisation of GST.”

According to Aditya Agarwal, CFO, Cleartrip, “The pandemic has adversely impacted the travel and travel-related sectors. This measure by the RBI helps alleviate the stress in the sector, provides much-needed support to the industry participants, and allows the industry to be well prepared to meet customer needs once the impact of the pandemic eases.”

Representing the hospitality industry, Pushpendra Bansal, COO, Lords Hotels & Resorts, said, “We welcome RBI’s decision of creating a special liquidity window of `15,000 crore with a tenor of three years. This is the first move of the government in infusing much-needed liquidity support to the crippled hospitality industry after the outbreak of COVID-19. However, I feel tenor of three years is not enough to come out of the crisis since hospitality industry was hit first and will recover last.”

By way of an incentive, banks will be permitted to park their surplus liquidity up to the size of the loan book created under this scheme with the Reserve Bank under the reverse repo window at a rate which is 25 bps lower than the repo rate, or termed in a different way, 40 bps higher than the reverse repo rate.