Second, sharpening the focus on credit flow to sectors that have a multiplier effect and support growth, the MPC permitted incremental lending (until July 31, 2020) to MSMEs, automobiles and residential housing without the requirement of cash reserve ratio (CRR), for a period of five years from the date of origination or tenure of the loan, whichever is earlier.
Research estimates that this move will bring in savings of 8-10 basis points (bps) for banks. This, in turn, can be passed on to customers by way of lower interest rates, helping spur demand to some extent.
Third, in an effort to strengthen monetary transmission, the RBI
mandated that loans to medium enterprises be linked to an external benchmark, effective April 1, 2020. Earlier, loans to micro and small enterprises had been linked to an external benchmark, effective October 1, 2019.