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New RBI measures to ease liquidity

New RBI measures to ease liquidity
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First Published: Fri, Nov 28 2008. 11 49 PM IST
Updated: Fri, Nov 28 2008. 11 49 PM IST
Mumbai: The Reserve Bank of India (RBI) on Friday extended its money lines given to commercial banks to 30 June and announced a few new measures to ease liquidity crunch in the Indian banking system.
The bank has doubled the time frame for export credit given at a concessional interest rate—from 90 days to 180 days—to help exporters who are facing difficulties on weakening demand for goods overseas. Banks offer such loans to exporters, known as post-shipment credit, at 250 basis points lower than their main lending rates. One basis point is one-hundredth of a percentage point.
The central bank also allowed banks to extend concessional loans to housing finance companies—a facility earlier granted to mutual funds and non-banking finance companies, or NBFCs.
Mutual funds are facing redemption pressure, while NBFCs, that borrow from banks and lend to small and medium enterprises, have not been able to raise money from banks.
In mid-October, RBI offered banks a Rs60,000 crore refinance facility for lending to NBFCs and mutual funds. Now, housing finance companies have been included in the list.
Under the original arrangement, the facility was to close on 31 March. Now, it has been extended to 30 June.
Similarly, a Rs40,000 crore special refinance facility for banks, which was introduced on 1 November for 90 days, will now remain open till 30 June, 2009.
RBI also extended till 30 June the foreign exchange swap facility, offered to banks to meet their short-term funding requirements in overseas branches.
The bank’s move came after Indian bank chief executives reiterated their demand for a dollar line of credit and more liquidity at a meeting with RBI governor D. Subbarao on Friday.
The agenda of the meeting, the first such after RBI’s mid-year monetary policy in September, was the status of financing small and medium enterprises and exports.
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First Published: Fri, Nov 28 2008. 11 49 PM IST