In order to mitigate the adverse impact of the second wave of the pandemic on certain contact-intensive sectors, a separate liquidity window of ₹15,000 crores is being opened till 31 March 2022 with tenors of up to three years at the repo rate. Under the scheme, banks can provide fresh lending support to:
1. Hotels and restaurants
2. Tourism – travel agents
3. our operators and adventure/heritage facilities
4. Aviation ancillary services – ground handling and supply chain
5. Other services that include:
a. Private bus operators
b. Car repair services
c. Rent-a-car service providers
d. Event/conference organizers
e. Spa clinics
f. Beauty parlours/saloons
Highlights of liquidity window
This is a good initiative on the part of the RBI to make available funds for the contact intensive sectors that are amongst the worst affected sectors during Covid19 Pandemic.
The sectors/services covered include four direct sectors/services and six services under other services where event/conference organisers are also included.
The scheme would make available funding (out of the overall corpus of Rs.15000 crores) to these sectors/services at repo rate (4pc presently) for a maximum tenors of three years.
The credit is available upto 31 March 2022, which means that an eligible borrower has a window of almost 10 months to avail the borrowing at such a lower rate of interest.
Points to keep in mind
The funding is totally at the lending bank’s discretion and not guaranteed by RBI in earlier stimulus packages.Hence, the selection of eligible borrowers will totally be at the discretion of banks.
Event companies must pay attention hence to the normal eligibility criteria of banks. Banks typically look for:
- Companies with good financials but business affected due to Pandemic Covid19
- Good credit history of the company and promoters
- No defaults in repayments of past dues and preferably not taken any moratorium during pandemic
- If moratorium has been taken, the repayment has been done on time
Banks will decide on the eligibility of event companies applying for loan, the quantum of loan and tenor basis the credit worthiness of the applicant.
So what should interested event companies do, on priority?
- Finalise your company’s financials for FY 2021 and get it audited, if required
- Finalise individual (Promoters of event companies) books as well as IT returns
- Business projections for the next three years
- Proposed use of the borrowed funds including repayment plan
- Improve credit rating by clearing past dues, if any and making due payments on or before the due dates
- Please note that even timely payment of your credit card bill improves your credit score
Make use of it
My recommendation to eligible borrowers: is to avail the facility as the funding is available at repo rate which is presently 4 percent.
Event companies should approach the banks soonest because of coverage of 10 sectors and the quantum of eligible borrowers is huge while the liquidity made available is only Rs. 15,000 crores.
This credit window could be the lifeline for several players in this industry to come out of this crisis.
(The author is a Chartered Accountant, and Founder and Principal Advisor, Your CFO & Business Advisory.)
Veteran CFO explains what the on-tap liquidity window for contact-intensive sectors means for event agencies and what they must do to avail bank loans using the scheme.