Refinance for Sidbi to ease liqudity stress

The Reserve Bank of India has decided to provide refinance totalling Rs 5,000 crore to the Small Industries Development Bank of India (Sidbi). This is in view of the need to ease the liquidity stress of micro and small enterprises (MSEs), which are employment-intensive and contribute significantly to exports, the central bank has said.

The refinance will be available for direct liquidity support to MSEs to finance receivables - including export receivables - by Sidbi, or for liquidity support to MSEs through selected intermediaries, such as banks, non-banking financial companies (NBFCs) and State Finance Corporations (SFCs).

The refinance will be available against receivables, including export receivables, outstanding as on November 14, 2013 onwards. The facility will be available at the prevailing 14-day term repo rate for a period of 90 days.

At the end of the 90-day period, drawals can also be rolled over. The refinance facility will be available for a period of one year up to November 13, 2014. The utilisation of funds will be governed by the policy approved by the board of Sidbi.

Medium enterprises are also facing liquidity tightness, RBI said. In order to enhance credit delivery to them, it has decided to include, as eligible priority sector lending, incremental credit, including export credit, extended to medium enterprises by scheduled commercial banks over the outstanding credit as on November 13, 2013. The facility will be available up to March 31, 2014, and will be within the overall target of 40 per cent.

This liquidity support comes in the wake of the slowdown, which has led to tight liquidity in a large number of MSEs in the manufacturing and services sectors.