RBI's direct support to healthcare sector will generate total output demand of Rs 80,000 crore: SBI Research
The macro impact of the scheme can be gauged from the fact that Rs 50,000 crore is roughly 9% of India's total health expenditure of Rs 6 lakh crore under private final consumption expenditure in 2019-20, according to SBI Ecowrap
- May 6, 2021,
- Updated May 6, 2021 1:39 PM IST
Recent measures unveiled by the Reserve Bank of India (RBI), including the announcement of a Rs 50,000 crore special liquidity window to address the needs of the healthcare sector, will go a long way in supporting it, according to SBI's Research report.
The report said the macro impact of the scheme can be gauged from the fact that "Rs 50,000 crore is roughly 9% of India's total health expenditure of Rs 6 lakh crore under private final consumption expenditure in 2019-20."
It further added that a direct support to the sector will generate "total output demand of roughly Rs 80,000 crore."
The report noted the sectors that will benefit from the central bank's on-tap liquidity window comprise rubber plastics, organic chemicals among others where the limit utilisation is close to 55%.
The report also flagged some concerns "evident on inflation on inflation from the statement, predominately emanating from spike in global commodity prices."
However, it highlighted the loss on account of the second wave is likely to be lesser as business resilience in the wake of the disaster has improved since last time.
"Businesses have learnt to survive despite Covid restrictions and containments. The measures today are largely addressed to the health sector and dedicated funding has been extended to the sector," the report stated.
Small finance banks (SFBs), it added, is another segment that has received special attention. The RBI has given a liquidity support of Rs 10,000 crore to the SFBs, under a special three-year long-term repo operation (SLTRO) at repo rate till October 31, 2021. Furthermore, the central bank has also allowed SFBs to lend MFIs for on-lending (with asset size of up to Rs 500 crore) under priority sector lending (PSL).
Also Read: Pharma stocks rise after RBI unveils Rs 50,000 crore liquidity facility for emergency healthcare
In respect of banking sector, the RBI has extended provision to deduct credit disbursed to 'New MSME borrowers' from their NDTL for calculation of the CRR till December 31, 2021.
Going by the ECLGS numbers, the report estimated that banks will be able to lend around Rs 30,000 crore of fresh loans to MSMEs and also assessed that they will save CRR of Rs 1,000 crore from the fresh loans to MSME units.
The RBI has also announced a restructuring resolution framework 2.0 for individuals, small businesses and MSME borrowers having an aggregate exposure of up to ?25 crore, and not availing restructuring under any of the earlier restructuring frameworks and classified as standard.
Further, the central bank has allowed banks to utilise 100% of floating provisions/countercyclical provisioning buffer held by them as on 31 Dec'20 for specific provisions for NPAs, with immediate effect and up to March 31, 2022.
Also Read: Banks will now lend to COVID-19 patients who need money for treatment
The SBI report, however, expects that "banks are unlikely to use such provisions as banks' provisioning coverage ratio is already close to 85% on Dec'20."
It added that the last tranche of 0.625% of the Capital Conservation Buffer has already been deferred from September 30, 2020, to October 1, 2021, easing a capital requirement of around Rs 65,000 crore at system level.
To support the states, the RBI has already enhanced the Ways and Means limit from a recommended ?47,010 crore to ?51,560 crore for all states/ UTs and this shall continue for six months i.e., up to September 30, 2021. Also, the number of days for which a State/ UT can be in overdraft in a quarter has been increased to 50 working days from the current stipulation of 36 working days.
"With varying degrees of stress in states' finances due to COVID-19, these moves will provide states with the succour to manage their borrowings," the report added.
Recent measures unveiled by the Reserve Bank of India (RBI), including the announcement of a Rs 50,000 crore special liquidity window to address the needs of the healthcare sector, will go a long way in supporting it, according to SBI's Research report.
The report said the macro impact of the scheme can be gauged from the fact that "Rs 50,000 crore is roughly 9% of India's total health expenditure of Rs 6 lakh crore under private final consumption expenditure in 2019-20."
It further added that a direct support to the sector will generate "total output demand of roughly Rs 80,000 crore."
The report noted the sectors that will benefit from the central bank's on-tap liquidity window comprise rubber plastics, organic chemicals among others where the limit utilisation is close to 55%.
The report also flagged some concerns "evident on inflation on inflation from the statement, predominately emanating from spike in global commodity prices."
However, it highlighted the loss on account of the second wave is likely to be lesser as business resilience in the wake of the disaster has improved since last time.
"Businesses have learnt to survive despite Covid restrictions and containments. The measures today are largely addressed to the health sector and dedicated funding has been extended to the sector," the report stated.
Small finance banks (SFBs), it added, is another segment that has received special attention. The RBI has given a liquidity support of Rs 10,000 crore to the SFBs, under a special three-year long-term repo operation (SLTRO) at repo rate till October 31, 2021. Furthermore, the central bank has also allowed SFBs to lend MFIs for on-lending (with asset size of up to Rs 500 crore) under priority sector lending (PSL).
Also Read: Pharma stocks rise after RBI unveils Rs 50,000 crore liquidity facility for emergency healthcare
In respect of banking sector, the RBI has extended provision to deduct credit disbursed to 'New MSME borrowers' from their NDTL for calculation of the CRR till December 31, 2021.
Going by the ECLGS numbers, the report estimated that banks will be able to lend around Rs 30,000 crore of fresh loans to MSMEs and also assessed that they will save CRR of Rs 1,000 crore from the fresh loans to MSME units.
The RBI has also announced a restructuring resolution framework 2.0 for individuals, small businesses and MSME borrowers having an aggregate exposure of up to ?25 crore, and not availing restructuring under any of the earlier restructuring frameworks and classified as standard.
Further, the central bank has allowed banks to utilise 100% of floating provisions/countercyclical provisioning buffer held by them as on 31 Dec'20 for specific provisions for NPAs, with immediate effect and up to March 31, 2022.
Also Read: Banks will now lend to COVID-19 patients who need money for treatment
The SBI report, however, expects that "banks are unlikely to use such provisions as banks' provisioning coverage ratio is already close to 85% on Dec'20."
It added that the last tranche of 0.625% of the Capital Conservation Buffer has already been deferred from September 30, 2020, to October 1, 2021, easing a capital requirement of around Rs 65,000 crore at system level.
To support the states, the RBI has already enhanced the Ways and Means limit from a recommended ?47,010 crore to ?51,560 crore for all states/ UTs and this shall continue for six months i.e., up to September 30, 2021. Also, the number of days for which a State/ UT can be in overdraft in a quarter has been increased to 50 working days from the current stipulation of 36 working days.
"With varying degrees of stress in states' finances due to COVID-19, these moves will provide states with the succour to manage their borrowings," the report added.