InvestorQ : What is the RBI announcement pertaining to the CRR cut on lending to specific sectors like automobiles and real estate?
Dia Deshpande made post

What is the RBI announcement pertaining to the CRR cut on lending to specific sectors like automobiles and real estate?

Answer
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Ria Jain answered.
7 months ago


In the credit policy announced on 06 February 2020, the RBI announced a special CRR relief for banks that lend to sectors like automobiles, real estate and to MSMEs. The idea is to encourage banks to lend to these sectors, which are currently undergoing a slowdown in demand. Subsequently, the RBI has also clarified that such benefit will be available for a period of five years. The way it will work is that any loan given by the bank for the above 3 sectors will be deductible from the NDTL (net demand and time liabilities) for the purpose of calculation of CRR. This will be a great relief for the banks as CRR earns zero interest and hence will substantially reduce the cost of the banks if they lend to realty, automobiles and to MSMEs. It also encourages lending to these sectors which are under strain.