Tag Archives: economic relief

economic stimulus package

https://pib.gov.in/PressReleasePage.aspx?PRID=1672321

Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman has announced 12 key measures, as part of Government of India’s stimulus to the economy, under AatmaNirbhar Bharat 3.0. The net stimulus announced today amounts to ₹ 2.65 Lakh crore. While addressing the Press Conference here today , SmtSitharaman also informed that the total stimulus announced by the Government and Reserve Bank of India till date, to help the nation tide over the COVID-19 pandemic, works out to ₹ 29.87 lakh crore, which is 15% of national GDP. Out of this, stimulus worth 9% of GDP has been provided by the government.

The following are the 12 keyannouncements  under AatmaNirbhar Bharat 3.0-

1) AatmaNirbhar Bharat Rozgar Yojana

A new scheme to incentivize job creation during COVID-19 recovery has been launched. If EPFO-registered establishments take in new employees without EPFO registration or those who lost jobs earlier, the Yojana will benefit these employees.

Beneficiaries / New Employees under the scheme would be:

  • any new employee joining employment in EPFO registered establishments on monthly wages less than Rs.15,000
  • EPF members drawing monthly wage of less than Rs.15,000 who made exit from employment during COVID Pandemic from 01.03.2020 to 30.09.2020 and is employed on or after 01.10.2020.

Central Govt. will provide subsidy for two years in respect of new eligible employees engaged on or after 01.10.2020 at following scale:

  • Establishments employing up to 1000 employees: Employee’s contributions (12% of Wages) & Employer’s contributions (12% of wages) totalling 24% of wages
  • Establishments employing more than 1000 employees: Only Employee’s EPF contributions (12% of EPF wages)

The scheme will be effective from October 1, 2020 and operational till 30th June 2021. Certain other eligibility criteria would have to be met, and Central Government will provide subsidy for two years in respect of new eligible employees.

2)Emergency Credit Line Guarantee Schemefor MSMEs, businesses, MUDRA borrowers and individuals (loans for business purposes), has been extended till March 31, 2021.

A Credit guarantee support scheme ECLGS 2.0 is being launched for Healthcare sector and 26 stressed sectors with credit outstanding of above Rs. 50 crore and up to ₹ 500 Croreas on 29.2.2020stressed due to COVID-19, among other criteria. Entities will get additional credit up to 20% of outstanding credit with a tenor of five years, including 1 year moratorium on principal repayment. This scheme will be available till 31.3.2021.

3) Production Linked Incentive worth  1.46 Lakh Crore to 10 champion sectors.

10 more Champion Sectors will be covered under the Production Linked Incentives Scheme to help boost competitiveness of domestic manufacturing. This will give a big boost to economy, investment, exports and job creation. A total amount of nearly 1.5 Lakh Crore has been earmarked across sectors, for next five years. The ten sectors are – Advance Cell Chemistry Battery, Electronic/Technology Products, Automobiles & Auto Components, Pharmaceuticals Drugs, Telecom & Networking Products, Textile Products, Food Products, High Efficiency Solar PV Modules, White Goods (ACs & LED), and Specialty Steel.

4)  18,000 Crore Additional outlay of for PM Awaas Yojana – Urban

A sum of Rs 18000 cr is being provided for PMAY- Urban over and above Rs. 8000 Crore already allocated this year. This will help ground 12 Lakh houses and complete 18 Lakh houses, create additional 78 Lakh jobs and improve production and sale of steel and cement, resulting in multiplier effect on economy.

5) Support for Construction & Infrastructure – Relaxation of Earnest Deposit Money & Performance Security on Government Tenders

To provide ease of doing business and relief to contractors whose money otherwise remains locked up, performance security on contracts has been reduced from 5-10% to 3%.It will also extend to ongoing contracts and Public Sector Enterprises. EMDfor tenders will be replaced by Bid Security Declaration. The relaxations in the General Financial Rules will be in force till December 31, 2021.

6) Income Tax relief for Developers & Home Buyers

Differential between circle rate and agreement value in real estate income tax under Section 43 CA of IT Act has been increased from 10% to 20%. This is for primary sale of residential units up to ₹ 2 Crore (from date of announcement of this scheme, till June 30 2021).Consequential Relief up to 20% shall also be allowed to buyers of these units under section 56(2)(x) of IT Act for the said period.The Income Tax relief provides incentive to middle class to buy homes.

7) Platform for Infra Debt Financing

Government will make ₹6,000 Crore equity investment in debt platform of National Investment and Infrastructure Fund (NIIF), which will help NIIF provide a debt of ₹ 1.1 Lakh Crore for infrastructure projects by 2025.

8) Support for Agriculture: 65,000 Crore for subsidized fertilizers

As fertilizer consumption is going up significantly, ₹65,000 Crore is being provided to ensure increased supply of fertilizers to farmers to enable timely availability of fertilisers in the upcoming crop season.

9) Boost for Rural Employment:

Additional outlay of ₹10,000 Crore is being provided for PM Garib Kalyan Rozgar Yojana to provide rural employment. This will help accelerate rural economy.

10) Boost for Project Exports

₹3,000 Crore boost is being providedto EXIM Bank for promoting project exports under Indian Development and Economic Assistance Scheme (IDEAS Scheme). This will help EXIM Bank facilitate Lines of Credit development assistance activities and promote exports from India.

11) Capital and Industrial Stimulus

₹10,200 Crore additional budget stimulus is being provided for capital and industrial expenditure on domestic defence equipment, industrial infrastructure and green energy.

12) R&D grant for COVID Vaccine

₹900 Crore is being provided to Department of Biotechnology for Research and Development of Indian COVID Vaccine.

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RBI covid package

RBI has announced some more relief measures as part of the covid package, which you can view https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11902&Mode=0 Many of the packages are extension of the previous packages which need to be extended in view of the extending covid lockdown.

Gist of the guidelines is given below:

(i) Rescheduling of Payments – Term Loans and Working Capital Facilities

2. In view of the extension of lockdown and continuing disruption on account of COVID-19, all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, All-India Financial Institutions, and Non-banking Financial Companies (including housing finance companies) (“lending institutions”) are permitted to extend the moratorium by another three months i.e. from June 1, 2020 to August 31, 2020 on payment of all instalments in respect of term loans (including agricultural term loans, retail and crop loans). Accordingly, the repayment schedule for such loans as also the residual tenor, will be shifted across the board. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.

3. In respect of working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions are permitted to allow a deferment of another three months, from June 1, 2020 to August 31, 2020, on recovery of interest applied in respect of all such facilities. Lending institutions are permitted, at their discretion, to convert the accumulated interest for the deferment period up to August 31, 2020, into a funded interest term loan (FITL) which shall be repayable not later than March 31, 2021.

(ii) Easing of Working Capital Financing

4. In respect of working capital facilities sanctioned in the form of CC/OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may, as a one-time measure,

(i) recalculate the ‘drawing power’ by reducing the margins till August 31, 2020. However, in all such cases where such a temporary enhancement in drawing power is considered, the margins shall be restored to the original levels by March 31, 2021; and/or,

(ii) review the working capital sanctioned limits upto March 31, 2021, based on a reassessment of the working capital cycle.

5. The above measures shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19. Further, accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.

6. Lending institutions may, accordingly, put in place a Board approved policy to implement the above measures.

Asset Classification

7. The conversion of accumulated interest into FITL, as permitted in terms of paragraph 3 above, and the changes in the credit terms permitted to the borrowers to specifically tide over economic fallout from COVID-19 in terms of paragraph 4 above, will not be treated as concessions granted due to financial difficulty of the borrower, under Paragraph 2 of the Annex to the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 7, 2019 (‘Prudential Framework’), and consequently, will not result in asset classification downgrade.

8. In respect of accounts classified as standard as on February 29, 2020, even if overdue, the moratorium period, wherever granted in respect of term loans, shall be excluded by the lending institutions from the number of days past-due for the purpose of asset classification under the IRAC norms. The asset classification for such accounts shall be determined on the basis of revised due dates and the revised repayment schedule.

9. Similarly, in respect of working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), where the account is classified as standard, including SMA, as on February 29, 2020, the deferment period, wherever granted in terms of paragraph 3 above shall be excluded for the determination of out of order status.

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Financial Package for MSME

Finance Minister announce measures for relief and credit support related to businesses, especially MSMEs to support Indian Economy’s fight against COVID-19

Posted On: 13 MAY 2020 6:39PM by PIB Delhi
  • Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs
  • Rs 20,000 crore Subordinate Debt for Stressed MSMEs
  • Rs 50,000 crore equity infusion through MSME Fund of Funds
  • New Definition of MSME and other Measures for MSME
  • No Global tenders for Government tenders of uptoRs 200 crore
  • Extending the Employees Provident Fund Support for business and organised workers for another 3 months for salary months of June, July and August 2020
  • EPF Contribution to be reduced for Employers and Employees for 3 months to 10% from 12% for all establishments covered by EPFO for next 3 months
  • Rs. 30,000 crore Special Liquidity Scheme for NBFC/HFC/MFIs
  • Rs. 45,000 crore Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs
  • Rs 90,000 crore Liquidity Injection for DISCOMs
  • Relief to Contractors given by extension of up to six months for completion of contractual obligations, including in respect of EPC and concession agreements
  • Relief to Real Estate Projects the registration and completion date for all registered projects will be extended up to six months. 
  • Tax relief to business as pending income tax refunds to charitable trusts and non-corporate businesses and professions to be issued immediately
  • Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” by 25% for the remaining period of FY 20-21
  • Due Dates for various tax relatedcompliances extended

 

Hon’ble Prime Minister Shri Narendra Modi yesterday announced a Special economic and comprehensive package of Rs 20 lakh crores – equivalent to 10% of India’s GDP. He gave a clarion call for आत्मनिर्भर भारत अभियान or Self-Reliant India Movement. He also outlined five pillars of Aatmanirbhar Bharat – Economy, Infrastructure, System, Vibrant Demography and Demand.

During the press conference here today, Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman said in her opening remarks that Prime Minister Shri Narendra Modi had laid out a comprehensive vision in his address to the Nation yesterday. She further said that after spending considerable time, the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of economic package in fight against COVID-19.

“Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, Smt. Sitharaman said our focus would be on land, labour, liquidity and law.

The Finance Minister further said that the Government under the leadership of Prime Minister Shri Narendra Modi has been listening and is a responsive Government, hence it is fitting to recall some reforms which have been undertaken since 2014.

“Soon after Budget 2020 came COVID-19 and within hours of the announcement of Lockdown 1.0, Pradhan Mantri Garib Kalyan Yojna (PMGKY) was announced,” Smt. Sitharaman said. She further said that we are going to build on this package.

“Beginning today, for the next few days, I shall be coming here with the entire team of the Ministry of Finance to detail the Prime Minister’s vision for Aatma Nirbhar Bharat laid out by the Prime Minister yesterday,” Smt Sitharaman said.

Smt. Nirmala  Sitharaman today announced measures focused on Getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector were also covered.

Over the last five years, the Government has actively taken various measures for the industry and MSME. For the Real Estate sector, the Real Estate (Regulation and Development) Act [RERA] was enacted in 2016 to bring in more transparency into the industry. A special fund for affordable and middle income housing was set up last year to help with the stress in this segment. To help MSMEs with the issue of delayed payment by any Government department or PSUs, Samadhaan Portal was launched in 2017. A Fund of Funds for startups was set up under SIDBI to boost entrepreneurship in the country and various other credit guarantee schemes to help flow of credit to the MSMEs.

Following measures were announced today:-

  1. Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs

To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with upto Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.

  1. Rs 20,000 crore Subordinate Debt for Stressed MSMEs

Provision made for Rs. 20,000 cr subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.

  1. Rs 50,000 crores equity infusion through MSME Fund of Funds

Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.

  1. New definition of MSME

Definition of MSME will be revised by raising the Investment limit. An additional criteria of turnover also being introduced. The distinction between manufacturing and service sector will also be eliminated.

 

  1. Other Measures for MSME

e-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days

 

  1. No Global tenders for Government tenders of up to Rs 200 crores.

General Financial Rules (GFR) of the Government will be amended to disallow global tender enquiries in procurement of Goods and Services of value of less than Rs 200 crores

  1. Employees Provident Fund Support for business and organised workers

The scheme introduced as part of PMGKP under which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020. Total benefits accrued is about Rs 2500 crores to 72.22 lakh employees.

  1. EPF Contribution to be reduced for Employers and Employees for 3 months

Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months. This will provide liquidity of about Rs.2250 Crore per month.

  1. Rs 30,000 crores Special Liquidity Scheme for NBFC/HFC/MFIs

Government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity being provided by RBI. Investment will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs. This will be 100 percent guaranteed by the Government of India.

  1. Rs 45,000 crores Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs

Existing Partial Credit Guarantee scheme is being revamped and now will be extended to cover the borrowings of lower rated NBFCs, HFCs and other Micro Finance Institutions (MFIs). Government of India will provide 20 percent first loss sovereign guarantee to Public Sector Banks.

  1. Rs 90,000 crore Liquidity Injection for DISCOMs

Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal instalments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.

  1. Relief to Contractors

All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give extension of up to 6 months for completion of contractual obligations, including in respect of EPC and concession agreements

  1. Relief to Real Estate Projects

State Governments are being advised to invoke the Force Majeure clause under RERA. The registration and completion date for all registered projects will be extended up to 6 months and may be further extended by another 3 months based on the State’s situation. Various statutory compliances under RERA will also be extended concurrently.

  1. Tax Relief to Business

The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately.

  1. Tax related measures
  • Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” – The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21.This will provided liquidity to the tune of Rs 50,000 Crore.
  • The due date of all Income Tax Returns for Assessment Year 2020-21 will be extended to 30 November, 2020.  Similarly, tax audit due date will be extended to 31 October 2020.
  • The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020.

 

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Read this release in: Marathi , Hindi , Assamese , Bengali , Punjabi , Gujarati , Odia , Telugu , Kannada , Malayalam

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FAQs on EMI moratorium

PIB press release dated 1st April, 2020

https://pib.gov.in/PressReleseDetailm.aspx?PRID=1609820#

Last week, the Reserve Bank of India announced a three-month moratorium on all term loans outstanding as on March 1, 2020, as well as on working capital facilities.

The Indian Banks Association has answered a list of Frequently Asked Questions about the technicalities of the moratorium.

QUESTION 1: When/what was the RBI announcement?

ANSWER: Last week, the Reserve Bank of India announced a three-month moratorium on all term loans outstanding as on March 1, 2020, as well as on working capital facilities.

 

QUESTION 2: Why has RBI announced the relief package?

ANSWER: Reserve Bank of India has announced certain regulatory measures to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. It was felt that there may be a temporary disruption in the cash flows, and in some cases loss of income, for the businesses/ individuals and the present measures work to bring relief to those businesses / individuals.

 

QUESTION 3: Which are the facilities eligible for availing the benefits under the RBI COVID-19 regulatory package and whether the facility is extended across the board to all borrowers?

ANSWER: All term loans (including agricultural term loans, retail, crop loans and loans under Pool Purchases) and cash credit/overdraft are eligible to avail the benefits under the package. This is available to all such accounts, which are standard assets as on 1st March 2020. Further, to avoid unnecessary paperwork the facility has been extended across the board to all the borrowers by extending repayment of term loan installments (includes interest) by 90 days. The original repayment period for term loans will get extended by 90 days e.g. a loan repayable in 60 installments maturing on 1st March 2025 will mature on 1st June 2025.

 

QUESTION 4: Is rescheduling of payments applicable for all kinds of term loans?

ANSWER: It is applicable for all term loans in all the segments, irrespective of the segment and the tenor of the term loans.

 

QUESTION 5: Is rescheduling of term loans only for principal amount or it also includes interest?

ANSWER: Rescheduling of principal can be done for a period of three months falling due between March 1, 2020 and May 31, 2020. For example, where the last installment of a term loan falls due for payment of on say 1st March 2020, it will become payable on 1st June 2020.

For EMI based term loans, it will be three EMIs falling due between 1st March 2020 and May 31st, 2020 and the tenor will be extended by three months and have to be repaid during the extended period, as per the example under (2) above.

For other term loans, it will be all the installments and Interest falling due during the same period, irrespective of the tenor of payment i.e. monthly, quarterly, half yearly, annually, bullet payment etc. For term loans, where the repayment has not commenced, the interest portion for three months alone needs to be reckoned.

 

QUESTION 6: What happens if the extended tenor of term loan goes beyond the maximum period stipulated for a product or as stipulated in the loan policy?

ANSWER: This can be extended for all such term loans without the need for seeking deviations or approvals.

 

QUESTION 7: What will be the treatment of interest on the working capital facilities?

ANSWER: The recovery of Interest applied to cash credit/overdraft on 31st March, 30th April and 31st May 2020 is being ‘deferred’. However, the entire interest must be recovered along with the interest being applied on 30th June 2020 and in cases, where monthly interest is not being applied, along with the next interest date.

 

QUESTION 8: What will be the impact of this relief by RBI on borrowers as far as reporting of default is concerned?

ANSWER: Any delay in payment leads to default and gets reported to Credit Bureaus. For business loans of Rs. 5 Crores and above, the banks report the overdue position to RBI also through CRILC. As a result of this relief package, the overdue payments post 1st March 2020 will not be reported to Credit Bureaus/ CRILC for three months. No penal interest or charges will be payable to the banks. Similarly, SEBI has allowed that Credit Rating Agencies (CRAs) may not consider the delay as default by listed companies if the same is owing to lockdown conditions arising due to COVID-19.

 

QUESTION 9: That means businesses/ Individuals should necessarily take the benefit?

ANSWER: You may take the benefits under this package if there is a disruption in your cash flows or there is loss of income. However, you must take into account that the interest on the loans, though not mandatorily payable immediately and gets postponed by 3 months, continues to accrue on your account and results in higher cost.

To give you a perspective, suppose your loan outstanding is Rs 100,000 and you are charged 12 percent rate of interest on your loans, then every month you are liable to pay Rs. 1,000 as interest. In case you opt not to service the interest every month, you are liable to pay interest at 12 percent p.a. and accordingly you will pay Rs. 3,030.10 at the end of 3rd month.

Similarly, in case the interest rate is 10 percent, you are required to pay Rs. 833 p.m. or Rs. 2,521 after three months.

 

QUESTION 10: Should I get upset if any bank staff or its collection agent approach me for repayment?

ANSWER: You should not get upset and tell bank staff/ collection agent that you want to avail the benefit being extended under regulatory package.

 

QUESTION 11: What about my credit card dues?

ANSWER: The relief is available for credit card payments also.

In case of credit card dues, there is a requirement to pay minimum amount and if it is not paid the same gets reported to Credit Bureaus. In view of the RBI circular, the overdues in the credit card account do not get reported to the credit bureaus for a period of three months.

However, interest will be charged by the credit card issuer on unpaid amount. You should check from your card provider to arrive at interest payable. Although no penal interest will be charged during this period, but you must remember that the interest rate on credit card dues are normally much higher compared to normal bank credit and you should take a decision accordingly.

 

QUESTION 12: What about interchangeability being permitted from non-fund based to fund based or FB to NFB for businesses?

ANSWER: The interest applied on the fund based portion of interchangeability availed during the said period of 1st March to 31st May 2020 will be eligible for moratorium. In respect of new sanctions accorded from 1st March and availed during the period, the interest applied on the Fund based portion would be eligible.

 

QUESTION 13: In what other ways, businesses have been given relief?

ANSWER: The businesses may request the bank to re-assess their working capital requirements on account of disruption of their cash flows or elongation of working capital cycle. They may also request for reduction in margin on NFB facilities (LCs/ BGs etc) or also relief in Security. Decision will be taken by the bank branches on case-to-case basis based on the genuineness of the request.

 

QUESTION 14: Are NBFCs/MFIs/HFCs eligible under the “easing of working capital financing”?

ANSWER: At present, they are not being considered under the scheme. However, RBI has made provision for sufficient liquidity support to these financial intermediaries under recently introduced Targeted Longer-term Refinancing Operations i.e. TLTRO. Liquidity availed under the scheme by Banks has to be deployed in investment grade corporate bonds, commercial paper, and non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 27, 2020.

Banks shall be required to acquire up to fifty per cent of their incremental holdings of eligible instruments from primary market issuances and the remaining fifty per cent from the secondary market, including from mutual funds and non-banking finance companies. Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 per cent of total investment permitted to be included in the HTM portfolio. Exposures under this facility will also not be reckoned under the large exposure framework. Banks will be able to support NBFCs/ MFIs/ HFCs etc. under this window and we do not foresee liquidity squeeze for these Financial Intermediaries.

 

QUESTION 14: Will all these measures of RBI be treated as “restructuring”? What about the provisions applicable?

ANSWER: The measures stipulated by RBI under the March 27, 2020 circular on COVID-19 Regulatory Package will not be treated as “restructuring” and hence will not result in asset classification downgrade. Accordingly, the enhanced provisions for Restructured Accounts will not apply.

 

QUESTION 15: What about installments/EMIs being recovered through SI/ECS/NACH? What will be the procedure for refund of the installment/EMIs, if demanded by the borrower?

ANSWER: Please get in touch with your bank for the revised mandate

 

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RBI relief on Covid

RBI press release dated 1st april, 2020

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=49619

1. Extension of realisation period of export proceeds

Presently value of the goods or software exports made by the exporters is required to be realized fully and repatriated to the country within a period of 9 months from the date of exports. In view of the disruption caused by the COVID-19 pandemic, the time period for realization and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export. The measure will enable the exporters to realise their receipts, especially from COVID-19 affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future export contracts with buyers abroad.

2. Review of Limits of Way and Means Advances of States/UTs

Reserve Bank had constituted an Advisory Committee (Chairman: Shri Sudhir Shrivastava) to review the Ways and Means limits for State Governments and Union Territories (UTs). Pending submission of the final recommendations by the Committee, it has been decided to increase WMA limit by 30 percent from the existing limit for all States/UTs to enable the State Governments to tide over the situation arising from the outbreak of the COVID-19 pandemic. The revised limits will come into force with effect from April 1, 2020 and will be valid till September 30, 2020.

3. Implementation of countercyclical capital buffer

The framework on countercyclical capital buffer (CCyB) was put in place by the Reserve Bank in terms of guidelines issued on February 5, 2015 wherein it was advised that the CCyB would be activated as and when the circumstances warranted, and that the decision would normally be pre-announced. The framework envisages the credit-to-GDP gap as the main indicator, which is used in conjunction with other supplementary indicators. Based on the review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary.

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corona – banking relief package

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11835&Mode=0

Please refer to the Statement of Development and Regulatory Policies released on March 27, 2020 where inter alia certain regulatory measures were announced to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. In this regard, the detailed instructions are as follows:

(i) Rescheduling of Payments – Term Loans and Working Capital Facilities

2. In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all instalments1 falling due between March 1, 2020 and May 31, 2020. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.

3. In respect of working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions are permitted to defer the recovery of interest applied in respect of all such facilities during the period from March 1, 2020 upto May 31, 2020 (“deferment”). The accumulated accrued interest shall be recovered immediately after the completion of this period.

(ii) Easing of Working Capital Financing

4. In respect of working capital facilities sanctioned in the form of CC/OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may recalculate the ‘drawing power’ by reducing the margins and/or by reassessing the working capital cycle. This relief shall be available in respect of all such changes effected up to May 31, 2020 and shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19. Further, accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.

Classification as Special Mention Account (SMA) and Non-Performing Asset (NPA)

5. Since the moratorium/deferment/recalculation of the ‘drawing power’ is being provided specifically to enable the borrowers to tide over economic fallout from COVID-19, the same will not be treated as concession or change in terms and conditions of loan agreements due to financial difficulty of the borrower under paragraph 2 of the Annex to the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 7, 2019 (“Prudential Framework”). Consequently, such a measure, by itself, shall not result in asset classification downgrade.

6. The asset classification of term loans which are granted relief as per paragraph 2 shall be determined on the basis of revised due dates and the revised repayment schedule. Similarly, working capital facilities where relief is provided as per paragraph 3 above, the SMA and the out of order status shall be evaluated considering the application of accumulated interest immediately after the completion of the deferment period as well as the revised terms, as permitted in terms of paragraph 4 above.

7. The rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting and reporting to Credit Information Companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

Other Conditions

8. Lending institutions shall frame Board approved polices for providing the above-mentioned reliefs to all eligible borrowers, inter alia, including the objective criteria for considering reliefs under paragraph 4 above and disclosed in public domain.

9. Wherever the exposure of a lending institution to a borrower is ₹ 5 crore or above as on March 1, 2020, the bank shall develop an MIS on the reliefs provided to its borrowers which shall inter alia include borrower-wise and credit-facility wise information regarding the nature and amount of relief granted.

10. The instructions in this circular come into force with immediate effect. The Board of Directors and the key management personnel of the lending institutions shall ensure that the above instructions are properly communicated down the line in their respective organisations, and clear instructions are issued to their staff regarding their implementation.

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Covid relief for petroleum sector

PIB press release dated 28th March, 2020

Petroleum & Explosives Safety Organization (PESO), under the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, has taken various measures to ensure uninterrupted supply of Oxygen to hospitals and other health care facilities and also to address the problems faced by Petroleum, Explosives, Fireworks, and Industrial Gas Industries due to nationwide lockdown for containment of COVID-19 pandemic. These include:

1. Instructions have been issued by PESO Hq to all its offices to ensure grant of licences for storage and transport of medical oxygen urgently.

2. Advisory has been issued by PESO on 25.03.2020 to Principal Secretaries (Home) of all States, requesting them to allow uninterrupted transportation and manufacturing of medical oxygen and nitrous oxide in line with MHA order No. 40-3/2020 dated 24/03/2020 on the measures to be taken for containment of COVID-19 in the country.

3. Validity of licenses for transportation of oxygen and other gases which will expire on 31/03/2020, has been extended up to 30/06/2020.

4. Validity of licenses for storage, transportation, sale, use and manufacturing of explosives and fireworks which will expire on 31/03/2020, has been extended up to 30/09/2020. Fee for late renewal of licences will also not be charged.

5. Cylinders used for storage of compressed oxygen, CNG, LPG and other gases, which are due for statutory hydro testing on 31/03/2020, shall be deemed to be due for testing on 30/06/2020.

6. Pressure vessels used for storage and transportation of oxygen, LPG and other gases, which are due for statutory testing for safety relief valves and hydro testing from 15/03/2020 to 30/06/2020, shall be deemed to be due for testing on 30/06/2020.

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Covid relief for power sector

PIB press release dated 28th march, 2020

Despite the lockdown imposed to contain the spread of the COVID 19 pandemic, the whole workforce of the power sector – generation, transmission, distribution and system operations – is working round the clock  to keep all homes and establishments lighted.Shri R.K.Singh, the Union Minister of Power, has said that in this time of crisis, the Ministry of Power is committed to provide 24×7 supply of electricity to all consumers.

Around 70% of power generation is from coal based power plants. In order to maintain the continuity of supply of coal by domestic coal companies and transportation by railways, the ministry is in touch with the Ministries of Railways and Coal.

Due to the lockdown, consumers are unable to pay their dues to the Distribution Companies (Discoms). This has affected the liquidity position of the Discoms thereby impairing their ability to pay to the generating and transmission companies. In this context, Shri R.K.Singh, the Union Minister of Power has approved significant relief measures for power sector .The following decisions have been taken to ease the liquidity problems of the Discoms –

  1. CPSU Generation / Transmission Companies will continue supply/ transmission of electricity even to Discoms which have large outstanding dues to the Generation / Transmission companies. During the present emergency there will be no curtailment of supply to any DISCOM.
  2. Till 30th June 2020 the payment security mechanism to be maintained by the Distribution Companies with the Generating Companies for dispatch of power shall be reduced by fifty percent.
  3. Directions have been issued to the Central Electricity Regulatory Commission to provide a moratorium of three months to Discoms to make payments to generating companies and transmission licensees and not to levy penal rates of late payment surcharge. State Governments are being requested to issue similar directions to State Electricity Regulatory Commissions.

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Covid economic relief

PIB press release dated 26th march, 2020

  • Insurance cover of Rs 50 Lakh per health worker fighting COVID-19 to be provided under Insurance Scheme
  • 80 crore poor people will to get 5 kg wheat or rice and 1 kg of preferred pulses for free every month for the next three months
  • 20 crore women Jan Dhan account holders to get Rs 500 per month for next three months
  • Increase in MNREGA wage to Rs 202 a day from Rs 182 to benefit 13.62 crore families
  • An ex-gratia of Rs 1,000 to 3 crore poor senior citizen, poor widows and poor disabled
  • Government to front-load Rs 2,000 paid to farmers in first week of April under existing PM Kisan Yojana to benefit 8.7 crore farmers
  • Central Government has given orders to State Governments to use Building and Construction Workers Welfare Fund to provide relief to Construction Workers

The Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman today announced Rs 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Corona Virus. While addressing the press conference here today, Smt. Sitharaman said “Today’s measures are intended at reaching out to the poorest of the poor, with food and money in hands, so that they do not face difficulties in buying essential supplies and meeting essential needs.”

The Minister of State for Finance & Corporate Affairs Shri Anurag Singh Thakur was also present besides Shri Atanu Chakraborty, Secretary, Department of Economic Affairs and Shri Debashish Panda, Secretary, Department of Financial Services. Following are the components of the Pradhan Mantri Garib Kalyan Package: —

PRADHAN MANTRI GARIB KALYAN PACKAGE

I. Insurance scheme for health workers fighting COVID-19 in Government Hospitals and Health Care Centres

  • Safai karamcharis, ward-boys, nurses, ASHA workers, paramedics, technicians, doctors and specialists and other health workers would be covered by a Special insurance Scheme.
  • Any health professional, who while treating Covid-19 patients, meet with some accident, then he/she would be compensated with an amount of Rs 50 lakh under the scheme.
  • All government health centres, wellness centres and hospitals of Centre as well as States would be covered under this scheme  approximately 22 lakh health workers would be provided insurance cover to fight this pandemic.

II.  PM Garib Kalyan Ann (अन्न) Yojana

  • Government of India would not allow anybody, especially any poor family, to suffer on account of non-availability of foodgrains due to disruption in the next three months.
  • 80 crore individuals, i.e, roughly two-thirds of India’s population would be covered under this scheme.
  • Each one of them would be provided double of their current entitlement over next three months.
  • This additionality would be free of cost.

Pulses:

  • To ensure adequate availability of protein to all the above mentioned individuals, 1 kg per family, would be provided pulses according to regional preferences for next three months.
  • These pulses would be provided free of cost by the Government of India.

III. Under Pradhan Mantri Garib Kalyan Yojana,

Benefit to farmers:

  • The first instalment of Rs 2,000 due in 2020-21 will be front-loaded and paid in April 2020 itself under the PM KISAN Yojana.
  • It would cover 8.7 crore farmers

IV. Cash transfers Under PM Garib Kalyan Yojana:

Help to Poor:

  • A total of 20.40 crores PMJDY women account-holders would be given an ex-gratia of Rs 500 per month for next three months.

Gas cylinders:

  • Under PM Garib Kalyan Yojanagas cylindersfree of cost, would be provided to 8 crore poor families for the next three months.

Help to low wage earners in organised sectors:

  • Wage-earners below Rs 15,000 per month in businesses having less than 100 workers are at risk of losing their employment.
  • Under this package, government proposes to pay 24 percent of their monthly wages into their PF accounts for next three months.
  • This would prevent disruption in their employment.

Support for senior citizens (above 60 years), widows and Divyang:

  • There are around 3 crore aged widows and people in Divyang category who are vulnerable due to economic disruption caused by COVID-19.
  • Government will give them Rs 1,000 to tide over difficulties during next three months.

MNREGA

  • Under PM Garib Kalyan Yojana, MNREGA wages would be increased by Rs 20 with effect from 1 April, 2020. Wage increase under MNREGA will provide an additional Rs 2,000 benefit annually to a worker.
  • This will benefit approximately 13.62 crore families.

V. Self-Help groups:

  • Women organised through 63 lakhs Self Help Groups (SHGs) support 6.85 crore households.
  1. Limit of collateral free lending would be increased from Rs 10 to Rs 20 lakhs.

VI. Other components of PM Garib Kalyan package

Organised sector:

  • Employees’ Provident Fund Regulations will be amended to include Pandemic as the reason to allow non-refundable advance of 75 percent of the amount or three months of the wages, whichever is lower, from their accounts.
  • Families of four crore workers registered under EPF can take benefit of this window.

Building and Other Construction Workers Welfare Fund:

  • Welfare Fund for Building and Other Constructions Workers has been created under a Central Government Act.
  • There are around 3.5 Crore registered workers in the Fund.
  • State Governments will be given directions to utilise this fund to provide assistance and support to these workers to protect them against economic disruptions.

District Mineral Fund

  • The State Government will be asked to utilise the funds available under District Mineral Fund (DMF) for supplementing and augmenting facilities of medical testing, screening and other requirements in connection with preventing the spread of CVID-19 pandemic as well as treating the patients affected with this pandemic.

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