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RBI monetary policy brings relief to salons, beauty parlours, and spa clinics in India

by Arun Shirishkar

The second wave of COVID-19 has unexpectedly resulted into a higher rate of morbidity and mortality in comparison to the first wave. However, unlike the case in the first wave where the economy came to an abrupt standstill under a nationwide lockdown, the impact on economic activity in the second wave is expected to be relatively contained with restrictions on mobility being regionalised and nuanced. 

In a major announcement, the monetary policy released by RBI on June 4, 2021, to mitigate the adverse impact of the pandemic’s second wave on certain contact-intensive sectors, a separate liquidity window of Rs 15,000 crore is being opened 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 beauty parlours and salons, and spa clinics along with 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 and event and conference organisers.

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.

RBI will continue to think and plan for more out-of-the-box ideas as the need of the hour is not to be overwhelmed by the current situation, but to collectively overcome it.

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