Statement on Developmental and Regulatory Policies by RBI in May 2020
The Reserve Bank of India has released the Monetary Policy Statement, 2020-21 after its MPC meet between May 20 to 22, 2020. After this the RBI has released the Statement on Developmental and Regulatory Policies. The major points that are important from exam point of view is mentioned below:
Refinancing Facility for Small Industries Development Bank of India (SIDBI)- Continuation of an earlier measure
RBI had announced a special refinance facility of ₹15,000 crore to SIDBI for on-lending/refinancing. The advances under this were provided at RBI’s policy repo rate at the time of availment for a period of 90 days. In order to provide greater flexibility to SIDBI in its operations, it has been decided to roll over the facility at the end of the 90th day for another period of 90 days.
Maximum permissible period of pre-shipment and post-shipment export credit
The maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks from the existing one year to 15 months, for disbursements made up to July 31, 2020.
Liquidity Facility for Exim Bank of India
A line of credit of ₹15,000 crore will be extended to the EXIM Bank for a period of 90 days from the date of availment with rollover up to a maximum period of one year so as to enable it to avail a US dollar swap facility to meet its foreign exchange requirements.
Extension of Time for Payment for Imports
It has been decided to extend the time period for completion of remittances against normal imports into India (except in cases where amounts are withheld towards guarantee of performance) from six months to twelve months from the date of shipment for such imports made on or before July 31, 2020.
Moratorium on Term Loan Instalments
It has been decided to permit lending institutions to extend the moratorium on term loan instalments by another three months, i.e., from June 1, 2020 to August 31, 2020.
Limit on Group Exposures under the Large Exposures Framework increased to 30%
Under the extant guidelines on the Large Exposures Framework, the exposure of a bank to a group of connected counterparties shall not be higher than 25%of the bank’s eligible capital base at all times. It has been decided to increase a bank’s exposure to a group of connected counterparties from 25% to 30% of the eligible capital base of the bank. The increased limit will be applicable up to June 30, 2021.