Incentive for lending to MSME, home, auto sectors announced

Mumbai: In a bid to increase lending to MSMEs as well as to auto and home segment, Reserve Bank on Thursday tweaked maintenance of cash reserve ratio (CRR) norms by providing relaxation in calculation of total deposits.

The move will encourage lending towards these targeted sectors having multiplier effect by banks as they will get exemption in CRR over incremental lending. This exemption window is available till July 2020. CRR is the percentage of total deposits that bank mandatorily park with the apex bank. It stands at 4 per cent of a bank's total deposit.

Alongside sustained efforts to improve monetary transmission, the Reserve Bank is actively engaged in revitalising the flow of bank credit to productive sectors to support growth, as per the Statement on Developmental and Regulatory Policies released by RBI.

"As a part of this, it has now been decided that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to micro, small and medium enterprises, 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 for maintenance of CRR," it said.