RBI Provides Cash Reserve Ratio relief to banks for 5 years

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The Reserve Bank of India(RBI) vide its notification dated 10th February 2020 has announced a special lending window with Cash Reserve Ratio (CRR) exemption which shall commence from February 14 and all incremental loans disbursed under the facility will have CRR exemption for the next five years.

The RBI had announced the exemption of CRR in its last monetary policy review as it wanted to push banks to lend more to select channels as mentioned earlier.

Accordingly, banks are allowed to deduct the equivalent amount of incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020, from their Net Demand and Time Liabilities (NDTL) for maintenance of the Cash Reserve Ratio (CRR).

Further, the Banks are required to report the exemption availed at the end of a fortnight under “exemptions/others” in the Section-42 return and fortnightly records of net incremental credit extended to the select sectors/NDTL exemption claimed, duly certified by the Chief Financial Officer (CFO) or an equivalent level officer, must be maintained by banks for supervisory review.

Click here to read the Notification.

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