Credit to MSME Entrepreneurs

Last updated: 06 May 2021

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The Reserve Bank of India (RBI) has extended an exemption related to credit for Micro, Small, and Medium Enterprises (MSMEs). Scheduled Commercial Banks can continue to deduct credit disbursed to new MSME borrowers from their Net Demand and Time Liabilities (NDTL) when calculating the Cash Reserve Ratio (CRR). This exemption, previously set to end on October 1, 2021, has now been extended for credits disbursed up to December 31, 2021.

Reserve Bank of India

RBI/2021-22/30
DoR.RET.REC.09/12.01.001/2021-22

May 05, 2021

All Scheduled Commercial Banks

Madam/Sir

Credit to MSME Entrepreneurs

Please refer to our circular DOR.No.Ret.BC.37/12.01.001/2020-21 dated February 5, 2021, on captioned subject.

2. In terms of the above circular, Scheduled Commercial Banks were allowed to deduct the amount equivalent to credit disbursed to new MSME borrowers from their Net Demand and Time Liabilities (NDTL) for calculation of the Cash Reserve Ratio (CRR). This exemption was available up to ₹ 25 lakh per borrower for the credit disbursed up to the fortnight ending October 1, 2021.

3. It has been decided to extend this exemption for such credits disbursed up to the fortnight ending December 31, 2021. All other instructions contained in the circular ibid remain same.

Yours faithfully

(Thomas Mathew)
Chief General Manager

FAQ :

The Reserve Bank of India has extended the exemption allowing Scheduled Commercial Banks to deduct credit disbursed to new MSME borrowers from their NDTL for CRR calculation.

The exemption was previously available for credit disbursed up to the fortnight ending October 1, 2021.

The exemption for credit disbursed to new MSME borrowers has been extended up to the fortnight ending December 31, 2021.

New MSME borrowers and Scheduled Commercial Banks that disburse credit to them benefit from this exemption.

Yes, banks can deduct the amount equivalent to credit disbursed to new MSME borrowers from their NDTL for CRR calculation, which can lower their required CRR.

Notification No : RBI/2021-22/30 DoR.RET.REC.09/12.01.001/2021-22
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12084&Mode=0

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