Mumbai, Nov 19 (KNN) To ease the liquidity pressure faced by micro and small enterprises (MSEs), the Reserve Bank of India (RBI) has decided to refinance an amount of Rs 5,000 crore to the Small Industries Development Bank of India (SIDBI) which will in turn use the funds for direct as well as onward lending to banks.

“In view of the need to ease the liquidity stress to Micro and Small Enterprises (MSE) sector which is employment intensive and contributes significantly to exports, it has been decided to provide refinance of an amount of Rs 5,000 crore to the Small Industrial Development Bank of India (SIDBI) under the provisions of Section 17(4H) of the Reserve Bank of India Act, 1934,” RBI said in a notification.


Furthermore, in order to encourage banks to lend more to medium enterprises, the RBI has decided to include incremental credit extended to these units by scheduled commercial banks (excluding regional rural banks) under the ambit of priority sector lending.

The RBI’s refinance facility will be available for direct liquidity support to finance receivables, including export receivables, to the small-scale units by SIDBI or for liquidity support through select intermediaries — 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. During this 90-day period, the amount can be flexibly drawn and repaid. At the end of the 90-day period, the drawal 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,” the notification added.
 
“The Medium Sector is also facing liquidity tightness. In order to enhance credit delivery to the medium sector, it has been decided to include, as eligible priority sector lending, incremental credit, including export credit, extended to the medium enterprises by the scheduled commercial banks (excluding RRBs) over the outstanding credit as on November 13, 2013,” said RBI.

The facility will be available upto March 31, 2014 and will be within the overall target of 40 per cent.

The liquidity support 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 services sector, particularly due to delayed settlement of receivables from large corporate, Public Sector Undertakings and government departments, the notification added. (KNN/SD)