Shaktikanta Das' prescription for Covid: What's in it for borrowers, businesses and Bharat

RBI provided a fresh lifeline to millions of stressed small businesses by extending the provision of restructuring of loans. A restructuring framework for MSMEs that were in default, but were standard on January 1, 2020 is already in place.

Higher loan ratio on gold, restructuring of MSME debt among key RBI announcements
Reserve Bank of India governor Shaktikanta Das today announced a to-do list for the RBI to bolster the economic fight against Covid-19. At the policy meet Das said the RBI would be maintaining the repo rate at 4% and an accommodative stance for the economy.

Here are the key takeaways from the MPC meet:

Relief for businesses and borrowers
- A window under the June 7 stressed asset resolution framework will be provided which will enable lenders to implement a resolution plan, without a change in ownership.
- RBI will also constitute a committee under KV Kamath on required financial parameters to be factored into resolution plan.


A lifeline for small and medium firms
- Stressed MSME borrowers will be eligible for restructuring their debt under the existing framework provided their accounts were standard as of March 1, 2020.
- This restructuring will have to be implemented by March 31, 2021
This will provide further relief to MSMEs as the pandemic continues to disrupt normal functioning and cash flows.

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Borrow more against gold jewellery
- Loan-to-Value for loans sanctioned by banks against pledge of gold for non-agri purposes increased to 90% from 75%.
- Relaxation available till March 31, 2021.
This will allow households to borrow more against existing gold holding than before. Households will be able to get more funds by taking a loan and not be forced to sell it to get more liquidity.

More money for real estate
- National Housing Bank to get Rs 5,000 crore to shield the housing sector from liquidity disruption, augment the flow of finance.
- Nabard to get Rs 5,000 crore to ameliorate stress faced by small NBFCs and MFIs.

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Flexibility for banks
- The Reserve Bank will introduce an optional facility to provide banks more flexibility/discretion to manage their day-end cash reserve ratio balances.
- Banks will now be able to set the amount that they want to keep as balance in their current account with RBI at the end of the day.

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Other announcements
- An innovation hub will be set up in India.
- A mechanism of positive pay for all cheques above Rs 50,000 to be introduced.
- A scheme of offload retail payments using cards and mobile devices and a system of online dispute resolution mechanism or digital payments will also be introduced.
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