RBI issues notification on CRR leeway for new retail, MSME loans

Banks can claim 1st deduction from NDTL of 14 Feb for CRR leeway

The Reserve Bank of India (RBI) is actively engaged in revitalising the flow of bank credit to productive sectors having multiplier effects to support growth impulses. 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 31 January 2020 from their net demand and time liabilities (NDTL) for maintenance of the cash reserve ratio (CRR).

Banks are advised that they can claim the first such deduction from the NDTL of 14 February 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 31 January 2020.

An amount equivalent to the incremental credit outstanding from the fortnight beginning 31 January 2020 and up to the fortnight ending 31 July 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 in a statement on Monday.

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