In a bid to spur credit growth and boost demand, the Reserve Bank of India (RBI) has offered banks Cash Reserve Ratio (CRR) exemption for five years for incremental credit disbursed to automobiles, residential housing, and micro, small and medium enterprises (MSMEs) between 31 Jan-31 July, 2020.
"The RBI is actively engaged in revitalising the flow of bank credit to productive sectors having multiplier effects to support growth impulses," the central bank said in a press release on Monday.
According to RBI statement, 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 CRR.
The central bank said banks can claim first such deduction from NDTL of 14 February for CRR exemption.
"Banks are advised that they can claim the first such deduction from the NDTL of February 14, 2020 for the amount equivalent to the incremental credit extended to the sectors indicated above over the outstanding level of credit as at the end of the fortnight ended January 31, 2020," RBI said in a press release.
As per RBI, an amount equivalent to the incremental credit outstanding from the fortnight beginning January 31, 2020 and up to the fortnight ending July 31, 2020 will be eligible for deduction from NDTL for the purpose of computing the CRR for a period of five years from the date of origination of the loan or the tenure of the loan, whichever is earlier.
RBI said the bank must maintain proper 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, for supervisory review.
By Chitranjan Kumar