RBI raises retail exposure limit to Rs 7.5Cr; to increase credit flow to SMBs
RBI said that the risk weight of 75 percent will apply to all fresh exposures and also to existing exposures, where incremental exposure may be taken by the banks up to the revised limit of Rs 7.5 crore.
In a bid to increase the credit flow to small businesses, the Reserve Bank of India (RBI) raised the Indian banks' maximum aggregate retail exposure limit to entities with turnover up to Rs 50 crore to Rs 7.5 crore, up from Rs 5 crore.
The risk weight of 75 percent will apply to all fresh exposures and also to existing exposures, where incremental exposure may be taken by the banks up to the revised limit of Rs 7.5 crore, the Reserve Bank of India (RBI) said in a release.
"In order to reduce the cost of credit for this segment, consisting of individuals and small businesses (i.e. with a turnover of up to Rs 50 crore), and also to harmonise with the Basel guidelines, it has been decided that the above threshold limit of Rs 5 crore for aggregated retail exposure to a counterparty shall stand increased to Rs 7.5 crore...", the RBI said.
The notification follows an announcement made in this regard on October 9, after the monetary policy committee meeting.
In another notification, the central bank said, "It has been decided to extend the dispensation of the enhanced Held to Maturity (HTM) limit of 22 percent for SLR securities acquired between September 1, 2020, and March 31, 2021, up to March 31, 2022. Banks may continue to hold such excess SLR securities in HTM category up to March 31, 2022."
RBI has also decided that the enhanced Held to Maturity (HTM) limit would be restored to 19.5 percent in a phased manner, beginning from the quarter ending June 30, 2022.
Earlier on Monday, Finance Minister Nirmala Sitharaman announced a Rs 73,000 crore package, including advance payment of a part of wages to central government employees and cash in lieu of LTC, to stimulate consumer demand and investment in the economy damaged by the coronavirus pandemic.
The government, which had in May, announced a Rs 20 lakh crore 'Aatmanirbhar Bharat' stimulus package, is pushing ahead with a full opening to try to boost the economy ahead of the usually high-spending festival season.
(Disclaimer: Additional background information has been added to this PTI copy for context)
Edited by Suman Singh