RBI opens R5,000 crore fund tap for small units

Direct liquidity support to SIDBI,banks and NBFCs for receivables.

Written by ENS Economic Bureau | Mumbai | Published: November 19, 2013 2:12:41 am

The Reserve Bank of India has decided to provide refinance of Rs 5,000 crore to the Small Industrial Development Bank of India (SIDBI),in a step aimed at easing the liquidity stress in the micro and small enterprises (MSE) sector.

Stating that the MSE sector is “employment intensive and contributes significantly to exports”,the RBI said the refinance,under the provisions of Section 17(4H) of the Reserve Bank of India Act,1934,will be available for direct liquidity support to finance receivables,including export receivables,to MSEs by SIDBI or for liquidity support through selected intermediaries like banks,non-banking financial companies (NBFCs) and state finance corporations (SFCs).

The refinance will be available against receivables outstanding as on November 14,2013 onwards.

“The facility will be available at the prevailing 14-day term repo rate for a period of 90 days. During this 90-day period,the amount can be flexibly drawn and repaid,” the RBI said.

At the end of the 90-day period,the drawal can also be rolled over. The refinance facility will be available for a period of one year up to November 13,2014. The utilisation of funds will be governed by the policy approved by the Board of SIDBI.

Further,the RBI has decided to include,as eligible priority sector lending,incremental credit,which includes export credit,extended to MSEs by the scheduled commercial banks over the outstanding credit as on November 13,2013.

The facility will be available up to March 31,2014,and will be within the overall target of 40 per cent,the RBI said. The medium sector is also facing liquidity tightness,it said.

The liquidity support comes in the wake of slowdown in the economy which has resulted in liquidity tightness in a large number MSEs in the manufacturing and services sector,particularly due to delayed settlement of receivables from large corporate,public sector undertakings and government departments.

According to a study by Assocham and Resurgent India,only about 33-34 per cent of firms operating in the sector have access to banks and institutional financing channels while the rest raise finance through informal financers,friends,family and other such personal channels.

The current overall debt finance demand of the sector is in excess of Rs 32 lakh crore. Of this,over Rs 6 lakh crore of debt is financed through formal sector. Public sector banks account for 70 per cent of the credit to the sector while private banks make up 20 per cent.

Apex bank buys gilts worth R6,157 cr through OMO auction

MUMBAI: The Reserve Bank purchased Rs 6,156.74 crore of government bonds through an open market operation (OMO) auction on Monday — less than the notified amount.

Last week,Reserve Bank Governor Raghuram Rajan had said the RBI planned to purchase Rs 8,000 crore of government bonds through OMOs to improve liquidity.

The RBI offered to buy 7.17 per cent 2015 gilts,7.59 per cent 2016,7.83 per cent 2018 and 8.20 per cent 2025 gilts in the auction,which was conducted after over a month.

Market participants offered to sell four gilts worth Rs 13,765.94 crore.

So far in this financial year,the RBI has bought over Rs 50,000 crore worth of government bonds through open market operations. PTI

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