RBI Offers US$1bn Liquidity Support to India’s Small Businesses

The Reserve Bank of India (RBI) has pledged to provide rupees (INR) 5,000 crore – equivalent to just over US$1bn – in liquidity support to the country’s micro and small enterprises (MSEs) to help them tide them over any difficulties they may be facing due to India’s  economic slowdown.

The central bank will provide the support through the Small Industrial Development Bank of India (SIDBI) in the form of refinancing of loans.

“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 RBI said in a statement.

“The refinance will be available against receivables, including export receivables, outstanding as on 14 November 2013 onwards.”

The facility will be available at the prevailing 14-day term repo rate for a period of 90 days. During this period, the amount can be flexibly drawn and repaid. “At the end of the 90-day period [it] can also be rolled over,” the RBI said.

The refinance facility will be available for one year up to 13 November 2014, it added. The utilisation of funds will be governed by policy approved by the board of SIDBI.

The RBI confirmed that the assistance package was in response to India’s slowing economic growth. “The liquidity support comes in the wake of slowdown in the economy which has resulted in liquidity tightness in a large number of MSEs in the manufacturing and services sector, particularly due to delayed settlement of receivables from large corporate, public sector undertakings and government departments,” it added.

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