The Reserve Bank of India (RBI) today widened the scope of the stimulus package by providing a refinance facility of Rs 5,000 crore for Exim Bank.
In addition, RBI’s central board, which met in Kolkata, approved the Rs 4,000 crore refinance facility for National Housing Bank (NHB).
On Saturday, the central bank had announced the refinance facility for NHB in addition to a similar window of Rs 7,000 crore for Sidbi to boost credit flow to housing and micro, small and medium enterprises. It had also decided to lower the repo and the reverse repo rate by 100 basis points.
The repo rate, which the rate at which RBI lends to banks, was lowered to 6.50 per cent, the lowest since June 2006. Similarly, the reverse repo rate, which is the rate at which the central bank absorbs surplus liquidity, was reduced from 6 per cent to 5 per cent, the lowest since April 2005.
In a statement today, RBI said that the refinance facility for Exim Bank, which will be available up to March 31, 2010, was taken with a view to mitigate the pressures on account of the recent developments on loan disbursements to Indian exporters companies and for honouring disbursements under export lines of credit extended at the behest of the government to overseas financial institutions, sovereign governments and other entities for financing imports from India.
The facility, under the provisions of the RBI Act, will be available at the prevailing repo rate under the liquidity adjustment facility for a period of 90 days. During this 90-day period, the amount can be drawn and repaid.
At the end of the period, the drawal can also be rolled over. “The utilisation of funds will be governed by the policy approved by the board of the Exim Bank,” the statement added.
“The Reserve Bank will continue to closely monitor the developments in the global and domestic financial markets and will take swift and effective action as appropriate. The Reserve Bank will endeavour to minimise the stress on various sectors of the economy on account of the international financial crisis and the global slowdown. The policy objective is to ensure adequate availability of liquidity in the system and to maintain conditions conducive for flow of credit for all productive purposes, particularly to the housing, export and small and medium industry sectors,” the press release said.
