New norms: RBI issues clarification on CRR calculation

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Published: February 27, 2020 3:00:25 AM

With lesser cash being parked with RBI as CRR, the move is expected to encourage banks to push credit in these specified segments.

rbi, npaRBI clarified that repayments and non-performing assets (NPA) would be deducted from the incremental credit.

The Reserve Bank of India (RBI) on Wednesday issued further clarifications on the recently announced relaxation on cash reserve ratio (CRR) calculations for incremental credit extended for automobiles, residential housing and micro, small and medium enterprises (MSMEs).

The central bank explained that to calculate the incremental credit, the outstanding retail loans to the specified segments as on every reporting Friday beginning February 14 up to that of July 31, 2020, will be deducted from the outstanding credit to the specified segments as on January 31, 2020.

“If the difference between the outstanding credit is positive, the equivalent amount of difference (should) be deducted from NDTL (net demand and time liabilities) for the purpose of CRR maintenance. If the difference in credit to any of the specified segment is negative, it should be ignored,” RBI said.

Lenders were awaiting further clarification on the specifics of the CRR exemption announced on February 6 during RBI’s bimonthly policy review.

RBI also clarified that repayments and non-performing assets (NPA) would be deducted from the incremental credit. The net amount of incremental credit will be eligible for the benefit of deduction from NDTL for a maximum period of five years, that is, up to the fortnight ending January 24, 2025, or the tenure of the loan, whichever is earlier.

Currently, the CRR for banks is pegged at 4% of their NDTL. With lesser cash being parked with RBI as CRR, the move is expected to encourage banks to push credit in these specified segments. The non-food credit growth during the fortnight-ended February 01 stood at 7.07%.

Rating agency Crisil said credit growth is expected to rise 200-300 basis points in the next fiscal as retail credit picks up.

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