The move will facilitate more fund flow for a sector which has been facing acute financial crunch in the aftermath of the pandemic.
In a bid to incentivise new credit flow to MSME borrowers, RBI Governor Shaktikanta Das on Friday announced measures that could ease credit for MSME entrepreneurs. “Scheduled commercial banks will be allowed to deduct credit disbursed to new MSME borrowers from their NDTL for calculation of CRR,” Das said in the latest bi-monthly monetary policy announcement of the RBI.
Das further added that for the purpose of this exemption, new MSME borrowers would be those who have not availed any credit facilities from the banking system as on 1st January 2021. “This exemption will be available for exposures up to Rs 25 lakh per borrower for credit extended up to the fortnight ending Oct 1st, 2021,” he added.
The move will facilitate more fund flow for a sector which has been facing acute financial crunch in the aftermath of the pandemic. This follows Finance Minister Nirmala Sitharaman’s announcement earlier this week in the Budget of doubling the allocation for MSMEs this year to Rs 15,700 crore.
K R Sekar, Partner, Deloitte India says that this is a step in the right direction for the sector. “MSMEs will have more access to formal banking credit and it will help address their financial requirements. Moreover, there has been an increased government spend in the Budget on three sectors – infrastructure, healthcare and development of financial institutions for infrastructure – all this will also inevitably lead to the revival of MSMEs,” he highlights.