Page 9 - Banking Finance April 2021

RBI CORNER

Reserve Bank

News

Loans for first-time MSME "While the credit to MSMEs have outstanding will be eligible for the
improved in FY21, the same is scheme, but the cap on turnover was
borrowers exempt from supported by emergency credit line lifted in November.

CRR guarantee scheme (ECLGS) to existing
borrowers of the banks. The proposal RBI withdraws 3 circulars
Reserve Bank of India has exempted
banks from keeping the cash reserve could incentivize banks to consider on pension recovery
ratio (CRR) requirement against loans lending proposals for fresh credit to The Reserve Bank said rules regarding
disbursed to first-time borrowers of new MSMEs, however, the actual recovery of excess or wrong pensions
micro, small and medium enterprises offtake could be muted given the are being flouted, and withdrew three
(MSMEs). continued risk aversion of lenders and circulars concerning the same.
limited impact on costing from CRR
In its statement on development and The RBI asked banks to seek guidance
regulatory policies, RBI said MSMEs exemption," said ICRA rating agency. from respective pension sanctioning
that had not availed of any credit facility In February 2020, RBI exempted banks authorities regarding the process to be
as of 1 January can be considered for from maintaining CRR for loans to all followed for recovery of excess pension
this exemption. This includes exposures MSMEs for five years, if these loans
paid to the pensioners.
of up to Rs.25 lakh per borrower for were disbursed between 31 January
credit extended up to the fortnight and 31 July 2020. CRR is the slice of "It has been brought to the notice of
ending 1 October 2021. deposits that banks have to park with RBI that the recovery of excess/wrong
"In order to incentivise new credit flow RBI. Currently, it is at 3% of banks' pension payments from the pensioners
to the MSME borrowers, scheduled deposits. Banks don't earn any interest are being made in a manner that is not
commercial banks will be allowed to on CRR. in keeping with the extant guidelines/
deduct credit disbursed to 'new MSME The announcement comes at a time Court orders," a central bank
borrowers' from their net demand and when the budget did not announce the notification said.
time liabilities (NDTL) for calculation of extension of the Rs. 3 trillion ECLGS for After examining the issue, the RBI
CRR," RBI said. stressed MSME borrowers. The scheme decided to withdraw three circulars

According to State Bank of India chief is set to expire in March 2021. Banks issued by its department of
economist Soumyakanti Ghosh, the and non-banks have sanctioned 76.6% government and bank accounts in 1991
exemption should result in of the funds allocated under the and 2016.
disbursements of Rs. 2.33 trillion of scheme, which offered small businesses If excess payments are due to be made
fresh loans to MSMEs by the end of loans of up to 20% of their entire credit to the government for excess/wrong
September 2021. Banks could save outstanding as on 29 February. Initially, pension payout, banks may be guided
CRR of Rs. 8,000 crore from fresh loans the Centre said companies with Rs. 100 by the guidelines laid down in circulars
to MSMEs. crore turnover and Rs. 25 crore released in 2009 and 2015.

BANKING FINANCE | APRIL | 2021 | 9