The Reserve Bank of India said on Monday that it would provide $800 million in liquidity support to the Small Industrial Development Bank of India to ease the stress on micro and small businesses.
The refinance will be provided to finance receivables, including export receivables, to micro and small enterprises by SIDBI or to support MSEs through various intermediaries, including banks and non-bank companies, as well as state finance corporations.
RBI’s announcement comes just after an economic slowdown that has resulted in liquidity tightness across a significant number of MSEs in manufacturing and services, due in part to a delayed settlement of receivables from large corporate and public sector undertakings and government departments.
The refinance will be available against outstanding receivables from Nov. 14 onwards, and the facility will be available at the 14-day term repo rate for 90 days, during which time the amount to be withdrawn and repaid is flexible.
At the end of the 90-day period, the amount can be rolled over, and the facility will be available for one year up to next November.
Additionally, the medium-sized enterprise sector is also facing liquidity tightness. Incremental credit, as well as export credit, will be extended to medium businesses by commercial banks over outstanding credit, and the facility will be available up to March within the overall target of 40 percent.