The Reserve Bank of India (RBI) will give banks Rs 50,000 crore to enable them to lend further for healthcare needs in the Covid-19 crisis, said governor Shaktikanta Das on Wednesday. “India has mounted a valiant defence against Covid-19. The RBI will continue to monitor the emerging situation and deploy all instruments at its command, said Das at an unscheduled briefing where he listed measures the central bank will take to support the economy during a second wave of infections. “On-tap liquidity of Rs 50,000 crore at repo rate is being opened till March 31, 2022. Under the scheme banks can support entities including vaccine manufacturers, medical facilities, hospitals and also patients,” said Das.
The Consortium of Indian Associations (CIA), a group of over 30 trade bodies and regional small and medium scale industry associations expressed disappointment over RBI s decision to not waive off or reduce the interest component of loans
Read more about Shaktikanta Das meets bank heads to discuss stressed asset outlook on Business Standard. Takes stock of the progress in implementing Covid resolution framework
Summary
One of the key drivers of economic recovery in India will be the efficient movement of capital from inefficient firms to efficient ones. The economic downturn caused by the coronavirus pandemic has been severe, and India’s economy was one of the worst affected in 2020–2021. Though the economy is recovering faster than initial estimates, sustained economic recovery will not take place if stressed businesses cannot restructure their debts properly or if failing firms cannot be resolved efficiently. India’s bankruptcy law is key to solving these challenges.
In 2016 India enacted the Insolvency and Bankruptcy Code, 2016 (IBC), which was a landmark reform to the nation’s financial system and the first comprehensive law to regulate insolvency.
The Union Budget for FY22 proposed the setting up of a bad bank in the form of an asset reconstruction company or an asset management company. Although the structure is not finalised, banks are likely to transfer their stressed loan seets to this entity, instead of selling bad loans. The bad bank would restructure them and sell them to investors.