The Reserve Bank of India (RBI) on Friday allowed banks to deduct loans disbursed to new micro, small, and medium enterprise (MSME) borrowers from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR).
In order to incentivize new credit flow to MSME borrowers, scheduled commercial banks will be allowed to deduct credit disbursed to ‘New MSME borrowers’ from their net demand and time liabilities (NDTL) for calculation of the cash reserve ratio (CRR), RBI said in its ‘Statement on Developmental and Regulatory Policies’, announced earlier in the day.
The central bank said for this exemption, ‘new MSME borrowers’ are defined as those MSME borrowers who have not availed of any credit facilities from the banking system as of January 1, 2021. It said the exemption will be available only for exposures up to Rs 25 lakh per borrower for credit extended up to the fortnight ending October 1, 2021, for a period of one year from the date of origination of the loan or the tenure of the loan, whichever is earlier.
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