-CB Edit Desk
The hospitality and tourism sector has welcomed the Reserve Bank of India (RBI) announcement on extending ₹15,000 crore liquidity window to support contact intensive businesses such as restaurants, travel agencies, hotels and aviation ancillary services that are bearing the brunt of the pandemic, as reported by The Mint.
Under the scheme, commercial banks can offer fresh lending support to hotels and restaurants; the tourism sector comprising travel agents and tour operators. The liquidity window of ₹15,000 crore is being opened till 31 March 2022, with tenors of up to three years at the repo rate.
Gurbaxish Singh Kohli, vice president, Federation of Hotel & Restaurant Associations of India (FHRAI) said that infusing liquidity will provide the much-needed 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 five years as a duration of three years is not sufficient to recover from the financial turbulence that the industry is going through,” he added.
The Indian Hotel industry’s total revenue fell roughly 75% in the last financial year. FHRAI said that the industry has taken a revenue hit of close to Rs.1.30 lakh cr in FY 2020-21. The industry revenue at the beginning of 2021 was below 20% of pre-pandemic levels and since April 2021 the revenue hasn’t even crossed 5%.
Indian Association of Tour Operators (IATO), which represents more than 1,600 operators for inbound tourists, said that the RBI announcement to offer easy loans will help tour operators who have had almost zero income for past more than one year.
“We would also request the government to announce SEIS (Service Export Incentive Scheme) which is now pending for the financial year 2019-20. Besides, we expect some grant for the revival of the battered tourism sector and rationalisation of GST,” said Rajiv Mehra, president, IATO.
Meanwhile, ratings agency ICRA Limited said that the real impact of this measure remains to be seen as about 70% of the hospitality entities are already on a negative credit outlook, compared to 92% of the entities with a stable outlook in January 2020.
“Given the inherent stress in the hospitality space and the fact that credit risk will continue to remain with the banks unlike with Emergency Credit Line Guarantee Scheme (ECLGS), the actual benefit for the sector from the aforesaid liquidity window remains to be seen,” said Vinutaa S, assistant vice president and sector head, ICRA Limited.
In the ECLGS scheme, access to easy emergency credit is given with the government standing as guarantor.
Recently, the government also removed Rs. 500 crore ceiling cap on loan outstanding for eligibility under the ECLGS 3.0 credit scheme for hotels. The maximum assistance however has been capped at Rs. 200 crores or 40% (of borrowings), whichever is lower.
The second wave has put a temporary brake on the recovery prospects of an already stressed hospitality sector, with occupancy dipping sequentially from 45% in March 2021 to 32-34% in April 2021 and further to about 25-27% in May 2021. ICRA’s outlook on the hospitality sector continues to be negative since March 2020 as challenges are far from over.