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Tuesday, November 6, 2012

RBI allows SIDBI to tap external commercial borrowing route

The Reserve Bank of India on Tuesday said the Small Industries Development Bank of India (SIDBI) can tap the external commercial borrowing route for on-lending to the micro, small and medium enterprise (MSME) sector.

For on-lending to the MSME borrowers, the RBI has stipulated that SIDBI should hedge the foreign currency risk in full in case the on-lending is in rupees.

On-lending in foreign currency will only be to those MSMEs which have a natural hedge by way of foreign exchange earnings.

Availment of ECB by SIDBI, including the outstanding ECBs, up to 50 per cent of owned funds, for on-lending to the MSME sector, will be under the automatic route and beyond 50 per cent of owned funds, the availment will be under the approval route, subject to a ceiling of $500 million per financial year.


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