Mumbai: In a bid to support the revival of sectors hit most by the COVID-19 pandemic, the Reserve Bank of India (RBI) on Friday decided to open a separate liquidity window of Rs 15,000 crore for certain contact-intensive sectors like hotels and restaurants, tourism and aviation ancillary services.

This is in addition to an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate till March 31, 2022, to boost the provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country. This was announced on May 5.

"In order to mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors, a separate liquidity window of Rs 15,000 crore is being opened till March 31, 2022, with tenors of up to three years at the repo rate," RBI Governor Shaktikanta Das said while announcing the bi-monthly monetary policy.

Under the scheme, banks can provide fresh lending support to hotels and restaurants; tourism travel agents, tour operators and adventure/heritage facilities; aviation ancillary services ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organisers, spa clinics, and beauty parlours/saloons, he said.

"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," he said.

In order to help, the Finance Ministry earlier this week expanded the scope of the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), which will now offer concessional loans to hospitals for setting up on-site oxygen generation plants.

Besides, the validity of the scheme has been extended by three months to September 30 and or till guarantees for an amount of Rs 3 lakh crore are issued.

The government has also removed the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0, subject to maximum additional ECLGS assistance to each borrower is limited to 40 per cent or Rs 200 crore, whichever is lower.

Loans to the civil aviation sector have been made eligible under ECLGS 3.0. The ECLGS 3.0 earlier covered business enterprises in hospitality, travel and tourism, leisure and sporting sectors, which had as of February 29, 2020, total credit outstanding not exceeding Rs 500 crore and overdue, if any, was for 60 days or less, on that date.

To nurture the still-nascent growth impulses and ensure the continued flow of credit to the real economy, he said, the Reserve Bank had extended fresh support of Rs 50,000 crore on April 7, 2021, to All India Financial Institutions (AIFIs) for new lending in 2021-22. This included Rs 15,000 crore to the Small Industries Development Bank of India (SIDBI).

"To further support the funding requirements of micro, small and medium enterprises (MSMEs), particularly smaller MSMEs and other businesses including those in credit deficient and aspirational districts, it has been decided to extend a special liquidity facility of Rs 16,000 crore to SIDBI for on-lending/refinancing through novel models and structures," he said.

This facility will be available at the prevailing policy repo rate for a period of up to one year, which may be further extended depending on its usage, he said.

To provide greater flexibility in raising short-term funds by Regional Rural Banks (RRBs), Das said, it has now been decided to permit these banks to issue Certificates of Deposit (CDs) to eligible investors.

"With a view to providing issuers with greater flexibility in liquidity management, it has also been decided that all issuers of CDs will be permitted to buy back their CDs before maturity, subject to certain conditions," he said.

In December 2020, the RRBs were permitted to access the liquidity windows of the Reserve Bank as well as the call/notice money market in order to facilitate more efficient liquidity management by the RRBs at competitive rates.

RBI projects retail inflation at 5.1 pc in FY22 on supply-side measures, monsoon

The Reserve Bank of India on Friday said it expects retail inflation to be at 5.1 per cent in the current financial year supported by the progress of monsoon and effective supply-side interventions by the government.

The projection is well within the Monetary Policy Committee's target to keep the rate of inflation at 4 per cent with an upper or lower tolerance level of 2 per cent.

However, the apex bank remained equally cautious about the upside risks due to rising global commodity prices.

Moreover, the persistence of the second wave of the pandemic and the consequent restrictions on activity on a virtually pan-India basis puts upside risks to inflation, RBI observed in its monetary policy review.

Presenting the second bi-monthly monetary policy review, RBI Governor Shaktikanta Das announced that the key repo rate -- the short-term lending rates to banks -- will be kept unchanged at 4 per cent.

The favourable base effects that brought about moderation in headline inflation by 1.2 percentage points in April, may persist through the first half of the year, conditioned by the "progress of the monsoon and effective supply-side interventions by the government", Das said.

Taking into consideration the measures taken so far as well as the upside risks, Das said the CPI (Consumer Price Index) inflation is projected at 5.1 per cent during 2021-22.

This consists of 5.2 per cent in the first quarter, 5.4 per cent in the second quarter, 4.7 per cent in the third quarter and 5.3 per cent in the fourth quarter of this fiscal, with risks broadly balanced, he said.

"... insulating prices of essential food items from supply-side disruptions will necessitate active monitoring and preparedness for coordinated, calibrated and timely measures by both Centre and state governments to prevent the emergence of supply-side bottlenecks and increase in retail margins," the governor said.

The retail inflation came in at 4.3 per cent in April which has provided some cushion as well as policy side elbow room, RBI said.

The CPI retail inflation data for the month of May is awaited in the third week of this month.

RBI said a normal southwest monsoon along with a comfortable buffer stock should help to keep cereal price pressures in check.

While on the other hand, the rising trajectory of the international crude oil prices within a broad-based surge in international commodity prices and logistics costs are worsening cost conditions.

"These developments could keep core price pressures elevated, although weak demand conditions may temper the pass-through to consumer inflation," the RBI governor said in his statement.

RBI said it will continue to take an accommodative stance as long as necessary to revive and sustain growth on a durable basis to mitigate the impact of the pandemic on the economy while ensuring that inflation remains within the target going forward.

Retail inflation is a key input for the Reserve Bank to decide on its monetary policy every two months.