Reserve Bank of India Governor, Shaktikanta Das made an unscheduled announcement amid a massive surge in Covid cases.

As India continues to face the Covid catastrophe, enveloped with chaos, trauma, and grief, its economic condition deteriorates which might keep the GDP well below its pre-pandemic path. On May 5, 2021, Wall Street brokerage Goldman Sachs lowered its estimate for India’s economic growth to 11.1 per cent in the fiscal year ending on March 31, 2022. Today, S&P Global Ratings slashed India's GDP growth forecast for the current financial year to 9.8 per cent saying the second COVID wave may derail the budding recovery in the economy and credit conditions.

Below is a slew of measures that Das unleashed to support the growth that has been hit by the second wave.

Government Securities

RBI will have a second purchase of government securities of Rs 35,000 crore under G-SAP 1.0 conducted on May 20 for an orderly evolution of the yield curve as a fresh Covid-19 wave threatens to hit the economy.

Special Liquidity Facility

RBI announced a tap liquidity window of Rs 50,000 crore with a tenure of up to 3 years at a repo rate being opened till March 31, 2022. Banks are allowed to support entities including vaccine manufacturers, and medical facilities, pathology labs, manufacturers, and suppliers of oxygen, for ramping up Covid-related healthcare infrastructure and services. Such lending will get priority sector classification till repayment or maturity.

Impact - The move will stimulate banks to undertake fresh lending to the emergency health services especially at this juncture when the healthcare system in India has been stretched.

One-Time-Restructuring for MSMEs

RBI re-opens one-time restructuring till September 30, 2021, for individuals, MSME borrowers. It has also announced Covid-related stressed assets resolution framework 2.0 under which individuals, small businesses, and MSMEs can restructure loans up to Rs 25 crore, if not availed of the facility last year.

Impact - This is likely to provide relief to the small borrowers who are one of the most vulnerable sections

Period of Moratorium to Be Extended

Under restructuring 1.0, the period of the moratorium can be extended up to 2 years.

Banks will be creating a Covid loan book under the scheme and park liquidity equal to the Covid loan book at 40 basis points above the reverse repo rate.

Small Finance Banks

Small finance banks are allowed to on-lend to smaller microfinance institutions of asset size up to Rs 500 crore.

The targeted long-term repo operation for small finance banks of up to Rs 10,000 crore, and the funds can be used for lending up to Rs 10 lakh per borrower.

Impact - Since Small finance banks play a vital role in lending, both these measures will positively impact credit growth.

Rationalisation of KYC Compliance Norms

RBI announced rationalisation of KYC compliance norms and decided to extend the scope of video KYC or V-CIP (video-based customer identification process) for new categories of customers.

Overdraft Facility

RBI relaxed rules for availing overdraft facility for State Government up to September 30, 2021. States will remain in overdraft for a maximum of 50 days. The Central Bank has increased the number of consecutive overdraft days from 14 days to 21 days.