RBI creates a liquidity window of Rs 15,000 crore to help hotels, tourism


Relief meant for ‘contact-intensive sectors’ that have been pulled down due to coronavirus

The hospitality and tourism sector welcomes RBI announcement of liquidity measures

The Reserve Bank of India (RBI) on Friday announced creating a special liquidity window of Rs 15,000 crore with a tenor of 3 years at the repo rate to provide liquidity support to the contact-intensive sectors hit by Covid-19.

The special liquidity window encourages banks to provide fresh lending support to hotels, restaurants, tourism, aviation ancillary services, and other services including private bus operators, car repair services, rent-a-car service providers, event/conference organizers, spa clinics, and beauty parlors/saloons.

These sectors have seen the biggest impact due to the second wave as authorities started imposing lockdown measures to curb the spread of the virus.

These sectors will be permitted to park their surplus liquidity, equivalent to the size of the loan book created by them under this scheme, under the reverse repo window at a rate that is 25 basis points (bps) lower the repo rate, or 40 bps higher than the reverse repo rate.

“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 crores is being opened till March 31, 2022, with tenors of up to three years at the repo rate”said RBI governor Shaktikanta Das in Mumbai after a meeting of the monetary policy committee.

The repo rate stands at 4 percent and the reverse repo rate stands at 3.35 percent.

Among other relief measures taken by RBI to mitigate the impact of the second wave of the virus is, it has expanded the coverage of borrowers under the restructuring 2.0 scheme. Now, MSMEs, non-MSMEs small businesses, and loans to individuals with aggregate exposure of Rs 50 crore will be eligible for restructuring. Earlier the threshold was set at Rs 25 crore.The hospitality and tourism sector has welcomed the decision of the Reserve Bank of India (RBI) to open a separate liquidity window of Rs 15,000 crore for contact-intensive sectors like hotels and restaurants, tourism and aviation ancillary services, hit hard by the pandemic.

This is the first significant sign indicating that the government has taken note of the severe effect that the pandemic has had on the hospitality industry and the huge economic impact it will have on the sector as well as the nation,” FHRAI Vice President Gurbaxish Singh Kohli said.

Infusing liquidity will provide the much-needed support to cash-strapped hospitality businesses without which the industry couldn’t have survived, he added. 

The 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.

However, the Federation of Hotel & Restaurant Associations of India (FHRAI) is of the view that the tenure should be for at least 5 years as a duration of 3 years is just not sufficient to recover from the financial turbulence that the industry is going through, Kohli said.

Echoing similar views, Hotel Association of India Vice President KB Kachru said the liquidity window is a major relief to the hospitality sector which has been reeling under the devastating impact of the ongoing pandemic. “Hotels, recognized as one of the most stressed sectors, have been requesting for such a relief to be provided urgently,” Kachru said.

It has given an additional lease of life to several hospitality establishments that are on the brink of closure. Ailing hotels will be able to save related jobs, lives, and livelihoods. Hotel loans are less likely to become NPAs, he added.

Indian Association of Tour Operators (IATO)  President Rajiv Mehra said, “We welcome the announcement by the RBI offering loans to the tourism and hospitality sector on easy terms and a lower rate of interest. Hope tour operators who have had almost zero income for past more than one year would get some succour out of it”.

Cheering RBI”s move, OYO India & South-East Asia CEO Rohit Kapoor said, “The past few months have been tough on the cash-strapped small and independent hotels and homeowners and this decision will provide a fillip to ease the financial pressure on them.”

Under the special liquidity 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, among others.