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
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.