RBI moots $800M refinance to SIDBI to ease liquidity stress on small businesses

The Indian central bank has decided to provide refinance of an amount of Rs 5,000 crore ($800 million) to the Small Industrial Development Bank of India (SIDBI) to ease the liquidity stress to micro and small enterprises (MSE). The MSE sector is employment-intensive and is also a critical generator of exports.

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, i.e., banks, non-banking financial companies (NBFCs) and state finance corporations (SFCs), according to a statement issued by RBI on Monday.

The refinance will be available against receivables, including export receivables, outstanding as on November 14, 2013 onwards. The facility will be available at the prevailing 14-day term repo rate for 90 days.

During this 90-day period, the amount can be flexibly drawn and repaid. At the end of the 90-day period, the amount can also be rolled over. The refinance facility will be available for one year up to November 13, 2014.

RBI has also noted that the medium scale sector is also facing a liquidity tightness. It has said incremental credit, including export credit, extended to the medium enterprises by the scheduled commercial banks (excluding regional rural banks) over the outstanding credit as on November 13, 2013, will also qualify as priority sector loans. This will enhance credit delivery to the medium sector.

The 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, particularly due to delayed settlement of receivables from large corporate, public sector undertakings and government departments.

(Edited by Joby Puthuparampil Johnson)

Leave Your Comment(s)