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CRR Relief for New MSME Loans: ₹25 Lakh Exemption

Current · Source: Reserve Bank of India · RBI/2020-21/92 · issued 05 Feb 2021 · ~2 min read

Quick answerRBI allows banks to deduct new MSME credit (up to ₹25 lakh per borrower) from NDTL for CRR calculation. Eligible borrowers are those with no banking credit as of Jan 1, 2021. Exemption valid for loans disbursed by October 1, 2021, for one year from origination.

The rule, in the simplest words

Banks can subtract new loans to first-time MSME (small business) borrowers from the money they must keep with RBI (CRR).
A 'new MSME borrower' is a small business that had no bank loan as of January 1, 2021.
The exemption is only for loans up to ₹25 lakh per borrower, given out by October 1, 2021.
The exemption lasts for one year from the loan start date or the loan's full term, whichever is shorter.
Banks must keep records of these loans and report the exemption to RBI every two weeks.

How it plays out — a real example

A credit & lending officer in Indore meets a local tailor who has never taken a bank loan. The officer approves a ₹20 lakh loan for new sewing machines, knowing the bank can deduct this amount from its CRR (cash kept with RBI) for one year. This frees up liquidity, helping the bank earn more on other loans while supporting a first-time small business.

What changed

Scheduled Commercial Banks can now deduct credit disbursed to 'New MSME borrowers' from their NDTL for CRR computation. A 'New MSME borrower' is defined as one who had no credit facilities from the banking system as on January 1, 2021. The exemption is capped at ₹25 lakh per borrower and applies to loans disbursed up to the fortnight ending October 1, 2021, for a period of one year from loan origination or loan tenure, whichever is earlier.

What it means for you

This measure incentivizes banks to lend to first-time MSME borrowers by reducing their CRR burden, effectively freeing up liquidity. Banks can improve their lending margins on these new MSME loans while supporting the government's push for credit to underserved small businesses. The exemption is time-bound and capped, so banks must act quickly to originate eligible loans before the October 2021 deadline.

What you must do

Identify MSME borrowers who have not availed any credit from the banking system as on January 1, 2021, and target them for new loans up to ₹25 lakh.
Ensure loan disbursements to eligible borrowers are completed by the fortnight ending October 1, 2021, to claim the CRR exemption.
Maintain fortnightly records of credit disbursed and CRR exemption claimed, certified by the CFO or equivalent officer, for supervisory review.
Report the exemption availed in Annex A to Form A under item VIII.1 as per the Master Circular on CRR and SLR dated July 1, 2015.

Who it affects

Scheduled Commercial Banks, MSME borrowers new to the banking system, Bank treasury and compliance teams

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-18 08:42 IST
extended_by — CRR Relief for New MSME Loans Extended to Dec 2021

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the definition of a 'New MSME borrower' for this CRR exemption?

A 'New MSME borrower' is one who had not availed any credit facilities from the banking system as on January 1, 2021.

What is the maximum loan amount eligible for the CRR exemption per borrower?

The exemption is available only up to ₹25 lakh per borrower.

How long does the CRR exemption last for each eligible loan?

The exemption is available for a period of one year from the date of origination of the loan or the tenure of the loan, whichever is earlier.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Extended by CRR Relief for New MSME Loans Extended to Dec 2021

RBI’s words: “It has been decided to extend this exemption for such credits disbursed up to the fortnight ending December 31, 2021.”

📜 Read the original circular — full text as issued by RBI

RBI/2020-21/92
 DOR.No.Ret.BC.37/12.01.001/2020-21
 February 05, 2021
 All Scheduled Commercial Banks
 Dear Sir / Madam
 Credit to MSME Entrepreneurs 
 In terms of paragraph 5 of the Statement on Developmental and Regulatory Policies of February 5, 2021 , Scheduled Commercial Banks will be 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). For the purpose of this exemption, ‘New MSME borrowers’ shall be defined as those MSME borrowers who have not availed any credit facilities from the banking system as on January 1, 2021. This exemption will be available only up to ₹25 lakh per borrower disbursed up to the fortnight ending October 1, 2021, for a period of one year from the date of origination of the loan or the tenure of the loan, whichever is earlier.
 2. Banks are required to report the exemption availed at the end of a fortnight, in Annex A to Form A as per Master Circular on Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) dated July 1, 2015 , under the item “Any other liabilities coming under the purview of zero prescription” at VIII.1. Proper fortnightly records of credit disbursed to new MSME borrowers/CRR exemption claimed, duly certified by the Chief Financial Officer (CFO) or an equivalent level officer, must be maintained by banks for supervisory review.
 Yours faithfully
 (Thomas Mathew)
 Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2020-21/92 · issued 05 Feb 2021. The plain-English explanation above is BankPulse’s own independent summary.

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Who does what — compliance checklist

💻 IT / Systems

Identify MSME borrowers who have not availed any credit from the banking system as on January 1, 2021, and target them for new loans up to ₹25 lakh.

📜 Compliance

Ensure loan disbursements to eligible borrowers are completed by the fortnight ending October 1, 2021, to claim the CRR exemption.
Maintain fortnightly records of credit disbursed and CRR exemption claimed, certified by the CFO or equivalent officer, for supervisory review.
Report the exemption availed in Annex A to Form A under item VIII.1 as per the Master Circular on CRR and SLR dated July 1, 2015.

Grouped from the action items above — a single circular may involve more than one team.

Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (Scheduled Commercial Banks, MSME borrowers new to the banking system, Bank treasury and compliance teams), your first concrete step on “CRR Relief for New MSME Loans: ₹25 Lakh Exemption” is: “Identify MSME borrowers who have not availed any credit from the banking system as on January 1, 2021, and target them for new loans up to ₹25 lakh.” (RBI issued this 05 Feb 2021).

Circular: RBI/2020-21/92 -- CRR Relief for New MSME Loans: ₹25 Lakh Exemption
Issued: 05 Feb 2021
Action required: Identify MSME borrowers who have not availed any credit from the banking system as on January 1, 2021, and target them for new loans up to ₹25 lakh.
Action required: Ensure loan disbursements to eligible borrowers are completed by the fortnight ending October 1, 2021, to claim the CRR exemption.
Action required: Maintain fortnightly records of credit disbursed and CRR exemption claimed, certified by the CFO or equivalent officer, for supervisory review.
Action required: Report the exemption availed in Annex A to Form A under item VIII.1 as per the Master Circular on CRR and SLR dated July 1, 2015.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________

Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12022&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.