New Delhi: Reserve Bank of India (RBI) today announced that it is extending assistance to small businesses and financial entities at the grassroot level that are bearing the biggest brunt of the second wave of Coronavirus infections. In this regard, RBI governor Shaktikanta Das announced financial measures based on the central bank’s assessment of the macroeconomic situation and financial market conditions. RBI has re-opened one-time restructuring for individuals and MSMEs.
Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)
- RBI Governor has hailed Small finance banks (SFBs) for playing a prominent role by acting as a conduit for last mile supply of credit to individuals and small businesses.
- In order To provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic, RBI has decided to conduct special three-year long-term repo operations (SLTRO) of Rs 10,000 crore at repo rate for the SFBs, to be deployed for fresh lending of up to Rs 10 lakh per borrower.
- This facility will be available till October 31, 2021.
Lending by Small Finance Banks (SFBs) to MFIs to be classified as Priority Sector Lending
- At present, lending by Small Finance Banks (SFBs) to MicroFinance Institutions (MFIs) for on-lending is not reckoned for priority sector lending (PSL) classification.
- However, in view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to
smaller MFIs (with asset size of up to Rs 500 crore) for on-lending to individual borrowers as priority sector lending.
- This facility will be available up to March 31, 2022.
Credit to MSME Entrepreneurs
- With a view to incentivise credit flow to the micro, small, and medium enterprise (MSME) borrowers, in February 2021 Scheduled Commercial Banks were allowed to deduct credit disbursed to new MSME borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR).
- In order to further incentivise inclusion of unbanked MSMEs into the banking system, this exemption currently available for exposures up to Rs 25 lakh and for credit disbursed up to the
fortnight ending October 1, 2021 is being extended till December 31, 2021.
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