This Statement sets out various developmental and regulatory policy measures relating to (i) liquidity measures; (ii) financial markets; and (iii) payment and settlement systems.
1.Extension of Term Liquidity Facility of ₹50,000 crore to Emergency Health
On May 5, 2021, an on-tap liquidity window of ₹50,000 crore at the repo rate
with tenors of up to three years was announced to boost provision of immediate liquidity for ramping up COVID-19 related healthcare infrastructure and services in the
country. Banks were incentivised for quick delivery of credit under the scheme through extension of priority sector classification to such lending up to March 31, 2022. Banks were expected to create a COVID-19 loan book under the scheme. By way of an additional incentive, such banks were eligible to park their surplus liquidity up to the size of the COVID-19 loan book with the RBI under the reverse repo window at a rate 25 bps lower than the repo rate, i.e., 40 bps higher than the reverse repo rate. Banks have deployed their own funds to the tune of ₹9,654 crore (up to February 4, 2022) towards COVID-19 related emergency health services. In view of the response to the scheme, it is now proposed to extend this window up to June 30, 2022 from March 31, 2022 as announced earlier.
2.Extension of On-tap Liquidity Window for Contact-intensive Sectors
On June 4, 2021, it was decided to open a separate liquidity window of ₹15,000
crore at the repo rate with tenors of up to three years available till March 31, 2022 for certain contact-intensive sectors. By way of an incentive, such banks were eligible to park their surplus liquidity up to the size of the COVID-19 loan book, created under this scheme with the RBI. The amount in this COVID-19 loan book attracted a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate. Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending were also eligible for this incentive. Banks have deployed their own funds to the tune of ₹5,041 crore (up to February 4, 2022) to the entities under contact intensive sector. In view of the response to the scheme, it is now proposed to extend this window up to June 30, 2022
2. Financial Markets
3. Voluntary Retention Route (VRR) – Enhancement of Limits
The Voluntary Retention Route (VRR) for investment in government and
corporate debt securities by Foreign Portfolio Investors (FPIs) was introduced on March 01, 2019 with a view to facilitating stable investments in debt instruments issued in the country. The Route sought to provide a separate channel, broadly free of macro-
prudential controls, to FPIs with long-term investment horizons. A dedicated
investment limit of ₹1,50,000 crore was set for investments under the VRR. Given the
positive response to the VRR as evident from the near exhaustion of the current limit, it is proposed to increase the investment limit under VRR by ₹1,00,000 crore to ₹2,50,000 crore with effect from April 1, 2022. The revised investment limits are being notified today.
4. Review of Credit Default Swaps (CDS) Guidelines
Guidelines for Credit Default Swaps (CDS) were last issued in January 2013.
Given the importance of the CDS market for the development of a liquid market for
corporate bonds, especially for the bonds of lower rated issuers, it was announced in
the Statement on Developmental and Regulatory Policies of December 4, 2020 that these guidelines would be reviewed. Accordingly, draft guidelines were issued on