The Reserve Bank of India (RBI) has introduced several policy measures to enhance liquidity support for the financial market and other stakeholders to ease the financial stress caused by the COVID-19 pandemic.

The bank has increased the limit for lending to renewable energy, including solar power and compressed biogas projects. To widen the scope of priority sector lending, the apex bank has included startups under its purview.

Under the previous priority sector lending, a limit of ₹150 million (~$2.01 million) was set for large-scale renewable projects like solar and wind, biomass and mini hydel projects, and non-conventional energy-based public utilities like street lighting and remote village. For the residential rooftop segment, the loan limit earlier was ₹1 million (~$13,363) per borrower.

When asked about the new lending cap for renewables, an official from RBI said, “The details of the revised lending cap for renewables along with the detailed guidelines on priority sector lending will be released shortly.”

To reduce the difficulties endured by smaller non-banking financial companies (NBFCs) in obtaining access to liquidity, it has decided to provide an additional special liquidity facility (ASLF) of ₹50 billion (~$668.16 million) to the National Bank for Agriculture and Rural Development (NABARD). The liquidity facility will be provided for one year at the RBI’s repo rate for refinancing NBFCs and other smaller NBFCs of asset size of up to ₹5 billion (~$66.8 million) to support agriculture and the rural non-farm sector.

Over the past few months, the regulatory focus has been to frame appropriate policy responses to mitigate the immediate impact of COVID-19 on the financial institutions and their constituents.

The economic fallout on account of the pandemic has led to significant financial stress for several borrowers across the board. The stress has impacted the long-term viability of firms that otherwise had a good track record under the existing promoters, as their debt burden became disproportionate.

According to the bank, a restructuring framework is already in place for the (micro, small and medium enterprises) whose accounts were in default but ‘standard’ as on January 01, 2020, subject to the restructuring being implemented up to December 31, 2020.

Recognizing the need for continued support to MSMEs, the bank has decided that in the case of MSME borrowers facing stress on account of the economic fallout of the pandemic, lending institutions can restructure the debt under the existing framework. This restructuring will be implemented by March 31, 2021.

In June last year, the Union Power Minister R.K. Singh had in a meeting advised the Ministry of New and Renewable Energy (MNRE) to follow up with the RBI for the removal of the priority sector lending limit for the renewable energy sector. A move expected to encourage the private sector banks to lend more to renewable energy projects and help developers with much-needed finance.

In the meeting, Singh also asked the banks and financial institutes to categorize renewable energy as a separate sector, different from the power sector, so that funds can easily flow to renewable energy projects.

In May this year, RBI announced the third round of monetary measures to boost the economy amid the lockdown caused by the coronavirus pandemic. The central bank had announced a reduction in the policy repo rate under the liquidity adjustment facility by 40 basis points to 4% from 4.40%. The marginal standing facility rate and the bank rate were reduced to 4.25% from 4.65%. These rates were kept status quo in the second round of monetary measures announced by RBI in April.

The Coronavirus pandemic is proving to be the solar industry’s biggest challenge this year, and the repercussions are being felt across industries all over the globe. Read Mercom’s in-depth report on the pandemic’s impact on India’s solar industry here.