RBI agrees to improve liquidity, restructure loans to stressed MSMEs

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Mumbai: Following a marathon nine-hour board meeting of the Reserve Bank of India on Monday agreed to ease liquidity for the financial sector and ease credit flow to the MSME sector. The move comes in response to the Modi government’s repeated pressure to increase liquidity in the system to boost economic activity.

The central bank has decided to form a panel that would review the economic capital framework, which governs the RBI’s capital requirements and terms of the transfer of its surplus to the government.

“The Reserve Bank of India’s (RBI) Central Board met today in Mumbai and discussed the Basel regulatory capital framework, a restructuring scheme for stressed MSMEs, bank health under Prompt Corrective Action (PCA) framework and the Economic Capital Framework (ECF) of RBI. The Board decided to constitute an expert committee to examine the ECF, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI. The Board also advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs.250 million, subject to such conditions as are necessary for ensuring financial stability. The Board, while deciding to retain the CRAR at 9%, agreed to extend the transition period for implementing the last tranche of 0.625% under the Capital Conservation Buffer (CCB), by one year, i.e., up to March 31, 2020. With regard to banks under PCA, it was decided that the matter will be examined by the Board for Financial Supervision (BFS) of RBI” RBI  said in a statement.

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