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Banks to lend INR 15,000 crore to hotels, restaurants, travel agents, SPA owners

Friday, June 4, 2021, 11:58 Hrs  [IST]
HBI Staff | Hyderabad

According to The Hindu, to mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors, the Reserve Bank of India (RBI) in additional measure has opened a separate On-tap Liquidity Window of INR 15,000 crores till March 31, 2022 with tenors of up to three years at the repo rate.

Under the 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; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organizers, spa clinics, and beauty parlours/saloons.

By way of an incentive, banks will be permitted to park their surplus liquidity up to the size of the loan book created under this scheme with the Reserve Bank under the reverse repo window at 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.

"We are glad that FHRAI’s efforts through various representations to the Government, to the RBI, and other authorities have finally borne fruit. We thank the Govt. and RBI for provisioning a separate liquidity window of INR 15,000 crore for the Hospitality and Tourism industry. This is the first significant sign indicating that the Govt. 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. Infusing liquidity will provide the much-needed liquidity support to cash-strapped hospitality businesses without which the industry couldn't have survived. However, we request the RBI to extend the tenure for at least 5 years. A duration of 3 years is just not sufficient to recover from the financial turbulence that the industry is going through. We are also relieved with the RBI’s decision to double the maximum aggregate exposure to INR 50 crore, enabling a larger set of borrowers to avail of the benefits under Resolution Framework 2.0. The FHRAI had been rigorously following up with all the Governmental agencies for over 14 months with several sector-specific relief recommendations. The Hospitality sector was at the brink of collapse with revenues dwindling to below 10 per cent of pre-COVID levels. The announcement has offered the industry a lifeline in its efforts to survive,” says Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI).

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