New Delhi, Feb 6 (IANS) In a major step to boost growth and lift sentiment, the Reserve Bank of India (RBI) has eased cash reserve ratio (CRR) requirement of commercial banks for sectors with multiplier effect such as automobiles, residential housing and MSMEs.
Some of the key non-banking finance companies such as M&M finance, L&T finance, Bajaj Finance, PEL and LIC Housing finance saw their shares rising on the bourses as the RBI move would spur the consumer demand.
The central bank said that alongside sustained efforts to improve monetary transmission, it is actively engaged in revitalizing the flow of bank credit to productive sectors having multiplier effects to support impulses of growth.
“As a part of this, it has now been decided that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for 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 January 31, 2020 from their net demand and time liabilities (NDTL) for maintenance of cash reserve ratio (CRR),” the RBI said on Thursday.
This exemption will be available for incremental credit extended up to the fortnight ending July 31, 2020.
The three sectors of auto, housing and MSMEs are major job-creators and an impetus to them would give a major push to the overall growth in the country. It is generally believed that the budget presented last week would unlikely boost growth much as spending has not been raised significantly.
Amit Gupta, Co-Founder & CEO, TradingBells said that the benefit of CRR to banks for the auto, home and MSME loans is a big positive for the overall market as liquidity was the main concern for economic growth.
–IANS
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