Our Bureau
In a bid to ease constraints on market participants and channel liquidity to various sectors of the economy that are impacted by Covid-19-related dislocations, the Rerserve Bank of India (RBI) has decided to extend a ₹15,000-crore line of credit to the Export-Import Bank of India (EXIM Bank) for90 days from the date of availment, with rollover up to a maximum period of one year.
The central bank also decided to roll over the ₹15,000-crore special refinance facility given to Small Industries Development Bank of India (SIDBI) at the end of the 90th day for another period of 90 days.
Global trade
The central bank observed that EXIM Bank provides financial assistance to exporters and importers with a view to promoting the country’s international trade. In view of the pandemic, however, global trade has contracted sharply and global financial markets have turned highly volatile and risk averse, especially to Emerging Market Economies.
As Exim Bank predominantly relies on foreign currency resources raised from international financial markets for its operations, the RBI said it is facing challenges to raise funds in international debt capital markets. Hence, the line of credit is being extended so as to enable the bank avail a US dollar swap facility to meet its foreign exchange requirements.
Small industries
The RBI said SIDBI plays an important role in meeting the long-term funding requirements of small industries. In view of the tightening of financial conditions in the wake of the pandemic, and difficulties in raising resources from the market, the RBI had announced a special refinance facility (provided at the RBI’s policy repo rate) of ₹15,000 crore to SIDBI for on-lending/refinancing.
According to the central bank, the roll-over of the refinancing facility will provide greater flexibility to SIDBI in its operations.