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| RBI to open Rs 20,000 cr refinance window for SMEs | |
| Press Trust of India / New Delhi November 23, 2008, 18:28 IST | |
 The government and the Reserve Bank of India (RBI) are contemplating to open a special Rs 20,000 crore refinance window to boost growth of small and medium enterprises (SMEs), which are facing credit crunch.
The special refinance window will encourage banks to lend funds to SMEs as the facility would be made available at a concessional rate, a finance ministry official said.
The details of the scheme, including the interest rate are being worked out and is likely to be announced by the central bank in the next 10-15 days, he added.
The facility would help meet the twin objectives of giving much required liquidity boost to the sector and at the same time help banks in meeting the mandatory 40 per cent priority sector lending target.
In addition to lack of credit, the SME sector is also suffering from low demand of their goods in the domestic market as well as for exports which have fallen by 15 per cent in October.
Besides, helping the small and medium enterprises in getting funds at cheaper rates, the scheme will ensure that banks maintain their interest margin even after lending the funds to SMEs below the benchmark prime lending rates (PLRs).
Under the refinance facility, the banks can borrow funds from the central bank concessional rates to on lend funds to the small enterprises.
Since the beginning of the liquidity crisis in middle of September, banks have shown their reluctance in providing credit to the SME sector on fears that loans would turn bad.
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