RBI extends Rs5,000-cr refinance to SIDBI to ease liquidity woes of MSE sector

The Reserve bank of India (RBI) will provide refinance to the tune of Rs5,000 crore to the Small Industries Development Bank of India (SIDBI) to ease the liquidity stress on micro and small enterprises (MSE) sector.

This is being done in view of the sector's potential for creating employment and its significant contribution to exports, RBI said in a release today.

The refinance will be available for direct liquidity support to finance receivables, including export receivable, to MSEs by SIDBI or for liquidity support to MSEs through selected intermediaries, that is, banks, non-banking financial companies (NBFCs) and state finance corporations (SFCs).

The refinance, to be offered at the prevailing 14-day repo rate and for a period of 90 days, will be available against receivables, including export receivables, outstanding as of 14 November 2013 onwards, RBI said.

At the end of the 90-day period, the drawal can also be rolled over.

This facility can be availed of during a one year period ending 13 November 2014.

The utilisation of funds will be decided by the policy approved by the board of SIDBI.

RBI said the medium sector is also facing liquidity tightness and hence it has been decided to make the sector eligible for priority sector lending in order to enhance credit delivery to the sector.

The decision will make sector eligible to obtain incremental credit, including export credit, extended to the medium enterprises by the scheduled commercial banks (excluding RRBs) over the outstanding credit as of 13 November 2013. This facility will be available up to 31 March 2014 and will be within the overall target of 40 per cent, RBI said.

The liquidity support by RBI comes in the wake of slowdown in the economy, which has resulted in liquidity tightness in a large number of micro and small enterprises (MSEs) in the manufacturing and service sectors, arising particularly from delayed settlement of receivables from large corporates, public sector undertakings and government departments, RBI said.