The Reserve Bank of India (RBI), on Monday, decided to provide liquidity support to micro and small enterprises (MSEs) to the tune of Rs.5,000 crore, through the Small Industrial Development Bank of India (SIDBI), and to include incremental credit to medium enterprises to qualify as priority sector lending.
“In view of the need to ease the liquidity stress to the MSE sector, which is employment-intensive, and contributes significantly to exports, it has been decided to provide refinance of an amount of Rs.5,000 crore to the SIDBI,” the RBI said in a press release.
The refinance will be available for direct liquidity support to finance receivables, including export receivable, 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), it added. The refinance will be available against receivables, including export receivables, outstanding as on November 14 onwards. The RBI also said that the facility would be available at the prevailing 14-day term repo rate for 90 days. During this 90-day period, the amount could be flexibly drawn and repaid.
At the end of the 90-day period, the drawal could also be rolled over. The refinance facility will be available for one year up to November 13, 2014.
The utilisation of funds will be governed by the policy approved by the board of SIDBI.
“The medium sector is also facing liquidity tightness,” the RBI said in the press release. In order to enhance credit delivery to the medium sector, the RBI said, it has been decided to include, incremental credit, including export credit, extended to medium enterprises by the scheduled commercial banks, as eligible priority sector lending, over the outstanding credit as on November 13, 2013.
Overall 40 % target
This facility will be available up to March 31, 2014, and will be within the overall target of 40 per cent.
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 due to delayed settlement of receivables from large corporate, public sector and government departments.