In view of the need to ease the liquidity stress to micro, small and medium enterprises, the RBI decided to provide refinance of Rs5,000 crore to the SIDBI
Reserve Bank of India (RBI) said it will provide a refinance of Rs5,000 crore to Small Industries Development Bank of India (SIDBI) to ease liquidity issues faced by small, micro and medium enterprises (SMMEs) across the country.
RBI said that micro and small enterprises (MSEs) sector is employment intensive and it contributes significantly to exports. In order to ease liquidity stress of this sector, RBI decided to provide refinance of Rs5,000 crore to SIDBI under the provisions of Section 17(4H) of the Reserve Bank of India Act, 1934.
The liquidity support comes in the wake of slowdown in the economy which has resulted in liquidity tightness in a large number of MSEs in the manufacturing and services sector, particularly due to delayed settlement of receivables from large corporates, public sector undertakings and government departments.
The refinance will be available for direct liquidity support to finance receivables, including export receivables, to MSEs by SIDBI or for liquidity support to MSEs through selected intermediaries, that is, banks, non-banking financial companies (NBFCs) and state finance corporations (SFCs). The refinance will be available against receivables, including export receivables, outstanding as on 14 November 2013 onwards. The facility will be available at the prevailing 14-day term repo rate, for a period of 90 days. During this 90-day period, the amount can be flexibly drawn and repaid. At the end of the 90-day period, the drawal can also be rolled over. The refinance facility will be available for a period of one year up to 13 November 2014. The utilisation of funds will be governed by the policy approved by the Board of SIDBI.
Incremental credit to medium enterprises to qualify as priority sector lending
RBI also decided to include medium sector as eligible priority sector in order to enhance credit delivery of the medium sector. RBI to provide lending, incremental credit, including export credit, extended to the medium enterprises by the scheduled commercial banks (excluding Regional Rural Banks) over the outstanding credit as on 13 November 2013. The facility will be available up to 31 March 2014 and will be within the overall target of 40 %, said RBI in its press release.
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