The Reserve Bank of India’s (RBI’s) move to help real estate sector in credit flow by giving cash reserve ratio (CRR) exemption is pending until fine print is out.
Banks will seek clarity on the implementation of this CRR exemption for incremental credit disbursed to automobiles, residential housing, and micro, small and medium enterprises (MSMEs), two bankers said.
RBI said in the February credit policy, “Banks are allowed to deduct the equivalent amount of incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended 31 January 2020 from their (NDTL) for maintenance of the cash reserve ratio (CRR).”
RBI also mentioned that it will open the exemption by 14th February and incremental loans disbursed will have CRR exemption for five years.
As per the banks, they are not sure if the incremental credit should be calculated at the portfolio level after excluding repayments. For instance, if a bank disbursed ₹5,000 crore worth of housing loans in a quarter and received repayments to the tune of ₹2,000 crore, the net growth will be ₹3,000 crore. Lenders want clarity on whether this net loan growth should be considered for calculating CRR exemption for the next five years.
Moreover, Banks are unclear that the incremental credit will include those already disbursed or just sanctioned.
“We are awaiting clarification from RBI on how to calculate this outstanding level of credit. For instance, we want to know how to consider CRR exemption on a housing loan sanctioned and disbursed over a period of 2-3 years,” one of the two bankers said.
“In our estimate, this could add up to ₹1.3 trillion of fresh disbursements at a system level equivalent to 1% of outstanding loans. However, 4% of this amount would be exempt from CRR amounting to 0.03% of system NDTL,” ICICI Securities said in a report.