The Reserve Bank of India will provide a special liquidity facility to enable banks to step up lending to the healthcare sector as India battles a severe second wave of Covid-19 infections.
All banks will take their own decisions as far as the special liquidity window is concerned. The spread available looks great and the provision for us to place our excess liquidity at a higher return is a big incentive. Already we have been providing funding to entities in the healthcare sector whenever they approach us. This kind of a window and the priority sector tag will enhance that effort.Ashwani Bhatia, Managing Director, SBI
Sachin Gupta, chief rating officer at CARE Ratings said that larger entities will benefit more from the RBI’s new window.
“There is no distinction between large and small borrowers on the basis of size. But, drawing by last years example, smaller borrowers may not have strong banking relations or strong banking channels,” said Gupta. “As such, initially at least, the scheme will benefit larger companies early and then benefit smaller pharmacies, suppliers and others.”
Economic Outlook
Commenting on the economic outlook, Governor Das said the situation has altered “drastically” in a few weeks. The localised lockdowns are likely to impact demand, said Das, adding that the impact will be more modest than last year.
Aggregate demand conditions, particularly in contact-intensive services, are likely to see a temporary dip, depending on how the Covid situation unfolds. With restrictions and containment measures being localised and targeted, businesses and households are learning to adapt. Consequently, the dent to aggregate demand is expected to be moderate in comparison to a year ago .Shaktikanta Das, Governor, RBI
The inflation trajectory, too, will be shaped by the Covid-19 infections and the impact of localised containment measures on supply chains and logistics, he said.
Das did not alter the RBI’s existing growth or inflation forecasts, saying the Monetary Policy Committee would review the situation when it meets in June. The RBi has projected a real GDP growth rate of 10.5% for FY22.
Economists are predicting a sequential contraction in the April-June quarter but see the economy rebounding thereafter. High frequency indicators, available for April, have shown a decline in movement of goods and some increase in unemployment, even though other indicators like electricity consumption remain steady.
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