With credit offtake remaining sluggish amid the Covid pandemic, the Reserve Bank of India (RBI) on Tuesday asked private banks to ensure credit facilities to individuals and businesses, and “quickly” implement its recent measures.

RBI Governor Shaktikanta Das, who met the chiefs of private banks, advised the lenders to ensure continuity in provision of various financial services including credit facilities to individuals and businesses in the face of challenges brought on by the pandemic. The meeting also discussed the progress in the implementation of Covid Resolution Framework 1.0, monetary policy transmission and liquidity scenario and implementation of various Covid-related policy measures taken by the RBI.

RBI officials had met the chiefs of public sector banks on May 19 and discussed the issue of credit flow and Covid resolution framework. The RBI is expected to announce the next bimonthly policy review on June 4.

Directing the banks to implement the measures announced by the RBI on May 5, the RBI top brass including four Deputy Governors discussed credit flows to different segments of the economy, particularly to small borrowers and MSMEs. The additional measures announced by the RBI coupled with the announcement of the second tranche of the GSAP 1.0 programme is likely to be beneficial to alleviate the constraints faced by a number of stakeholders in the economy from the financing side.

On May 5, the RBI unveiled a host of measures to boost fund flow to the healthcare sector and pump more liquidity into the system apart from providing another window to individual borrowers and small units for loan restructuring. Das impressed upon the banks “to quickly and swiftly implement the measures announced by the RBI on May 5 in right earnest” and also urged them to continue focussing on efforts to further strengthen their balance sheets proactively.

However, according to Care Ratings, there are two things which one needs to be cautious about — one, whether bank lending is likely to be strong following these measures because despite a host of liquidity measures from the RBI in FY21, bank credit off-take was only 5.6 per cent in FY21. “Secondly, with mounting cases and several states releasing restrictions on a frequent basis, it will be interesting to see how significant any deviation (if any) in the RBI’s economic growth and inflation outlook amidst the second wave will be,” it said.

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