RBI exempts CRR maintenance for incremental bank credit to specific sectors

Feb 12, 2020 | by Avantis RegTech Legal Research Team


Finance & Taxation Compliance

The Reserve Bank of India (RBI) on February 10, 2020, has decided to exempt the Cash Reserve Ratio (CRR) maintenance for incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to micro, small and medium enterprises (MSMEs). According to the Statement on Development and Regulatory Policies dated February 06, 2020, the banks are allowed to deduct the equivalent amount of incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to 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 CRR.

The banks are advised that they can claim the first such deduction from the NDTL of February 14, 2020 for the amount equivalent to the incremental credit extended to the sectors indicated above over the outstanding level of credit as at the end of the fortnight ended January 31, 2020. An amount equivalent to the incremental credit outstanding from the fortnight beginning January 31, 2020 and up to the fortnight ending July 31, 2020 will be eligible for deduction from NDTL for the purpose of computing the CRR for a period of five years from the date of origination of the loan or the tenure of the loan, whichever is earlier. The banks are required to report the exemption in fortnight return in Form A. A proper fortnightly records of net incremental credit extended to the select sectors or NDTL exemption claimed must be maintained by banks for supervisory review.

[Notification NO. DOR.No.Ret.BC.30/12.01.001/2019-20]


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