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Even as it has maintained the status quo on rates, the Reserve Bank of India (RBI) announced a slew of measures to ensure more liquidity to various sectors as part of the Statement on Developmental and Regulatory Policies that it released along with the sixth bi-monthly monetary policy statement on Thursday.
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RBI's new twist: Making retail loans cheaper without cutting policy rate
Holds repo rate at 5.15% as inflation soarsTo incentivise bank credit to a productive sectors, the RBI has announced that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to Micro, Small and Medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020, from their net demand and time liabilities (NDTL) for maintenance of cash reserve ratio (CRR).
This exemption will be available for incremental credit extended up to the fortnight ending July 31, 2020, it said.
“Alongside sustained efforts to improve monetary transmission, the Reserve Bank is actively engaged in revitalising the flow of bank credit to productive sectors having multiplier effects to support impulses of growth,” the statement noted.
RBI's announcements
The RBI announced that it has decided to link pricing of loans by scheduled commercial banks for the medium enterprises also to an external benchmark effective April 1, 2020. “Detailed guidelines to this effect will be issued separately,” it said.
It had mandated the external benchmarking of retail loans and those to micro and small enterprises from October 1, 2019.
The RBI also announced the extension of the restructuring scheme for MSMEs to December 31, 2020. “This will benefit the eligible MSME entities which could not be restructured under the provisions of the circular dated January 1, 2019, as also the MSME entities which have become stressed thereafter,” it said, stressing that this is a one-time regulatory dispensation. The restructuring of the borrower account was to be implemented by March 31, 2020.
The RBI announced a new liquidity management framework, and said that the weighted average call rate (WACR) will continue to be its operating target and the liquidity management corridor is retained.
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