Lok Sabha Question No. 5124 (UNSTARRED), answered on 2022-04-04
Subject: Covid-19 and Lockdown Impact on Financial  Sector
Ministry: FINANCE
Asked by: Rahul Ramesh Shewale, Chandra Sekhar Sahu, Pritam Gopinath Munde, Girish Bhalchandra Bapat

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO.5124

To be answered on the 4 th  April 2022/Chaitra 14, 1944 (Saka)

## Covid-19 and Lockdown Impact on Financial Sector

5124. SHRI RAHUL RAMESH SHEWALE: DR. PRITAM GOPINATHRAO MUNDE:

SHRI CHANDRA SEKHAR SAHU: SHRI GIRISH BHALCHANDRA BAPAT:

Will the Minister of FINANCE be pleased to state:

(a) whether it is true that due to the Covid-19 outbreak and lockdown, the financial sector has more difficulties than medical emergencies in the country;

- (b) if so, the details thereof;
- (c) whether there was no cogent plan with the Government nor with the Reserve Bank of India to avoid the worst financial situation;
- (d) if so, the details thereof;
- (e) whether the measures taken by the Government are not enough to improve the conditions of the small-scale industries, homeloan borrowers and other small borrowers; and

(f) if so, the details thereof along with the corrective measures taken by the Government to improve the situation?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (DR. BHAGWAT KARAD)

(a) to (f): Financial sector, like many other sectors, has faced difficulties during the Covid-19 pandemic  period.  However,  due  to  the  sustained  efforts  and  timely  interventions  by  the Government  and  Reserve  Bank  of  India  (RBI),  the  stress  in  the  banking  system  has  been addressed  effectively.  The  various  measures  taken  to  minimise  the  impact  of  the  Covid-19 pandemic on the financial sector include, inter alia , the following -

- (i) grant of a moratorium of six months on payment of all term loan instalments falling due between 1.3.2020 and 31.8.2020, without asset classification downgrade;
- (ii) deferment of recovery of interest on working capital during the moratorium period and allowing repayment of accumulated interest as funded interest term loan till March 2021;
- (iii) concessions in timelines for resolution to be adhered to by lenders under RBI's Prudential Framework on Resolution of Stressed Assets, with extension of resolution  timelines to exclude the period from 1.3.2020 till 31.8.2020;
- (iv) to  incentivise  new  credit  flow  to  the  micro,  small,  and  medium  enterprise  (MSME) borrowers, Scheduled Commercial Banks (SCBs) were allowed to deduct credit disbursed to  'New  MSME  borrowers'  from  their  net  demand  and  time  liabilities  (NDTL)  for calculation of Cash Reserve Ratio (CRR). This exemption was available till 31.12.2021;
- (v) rescheduling  of  payments  and  other  reliefs  on  account  of  Covid-19  Pandemic  under Covid-19 Regulatory Package -Term Loans and Working Capital Facilities;
- (vi) permitted lending institutions to implement resolution plans /restructuring in respect of eligible loan accounts having stress on account of the pandemic, without classifying the loan account as a non-performing asset. Such plans/restructuring may inter alia ,  include grant  of  moratorium  on  repayment  of  loans  and  interest  reliefs  to  borrowers, vide its circulars dated 6.8.2020 and 5.5.2021;
- (vii) loan  guarantee  scheme  for  Covid  affected  sectors  (LGSCAS)  to  provide  guarantee coverage for the funding provided by SCBs to eligible projects in the healthcare sector for setting  up  of  or  modernising/expanding  (1)  hospitals/  dispensaries/clinics/medical colleges/ pathology labs/ diagnostic centres; (2) facilities for manufacturing of vaccines/oxygen/ventilators/ priority medical devices; (3) public healthcare facilities;
- (viii) emergency  credit  line  guarantee  scheme  (ECLGS)  was  launched  to  extend  emergency credit facilities to business enterprises /MSMEs to meet their addition working capital / term loan requirement, which has now been extended up to March-2023 and Rs. 5 lakh crore, including additional increase provided of Rs. 50,000 crore to hospitality and related sectors;
- (ix) term liquidity facility of Rs. 50,000 crore to ease access to Emergency Health Services; and
- (x) on-tap liquidity window of Rs. 15,000 crore for Contact-intensive Sectors.

Aided by the proactive measures, as per RBI data of sectoral credit deployment, credit growth of micro, small and medium industries has improved from 11.72% to 14.80% and of housing sector from 8.06% to 9.28%, in December-2020 (y-o-y) and December-2021 (y-o-y), respectively.

Also, as a result of the above measures, key health parameters of Public Sector Banks (PSBs) and SCBs such as capital to risk weighted assets ratio, net non-performing assets ratio, provision coverage ratio, net profit, etc. have shown improvement from FY 2019-20 to FY 2020-21 and further to, in the first nine months of FY 2021-22. Further, all PSBs have registered net profit in the first nine months of FY 2021-22.

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