Refinance by RBI

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Reserve Bank of India (RBI), wholly owned by the Government of India, is the central bank of the country having monetary authority, as well as regulatory and supervisory power on the financial system. It's also the issuer of Indian currency as well as the manager of exchange control. Refinance by RBI is meant to help individuals, corporations as well as the overall economy of the country.

Types of Refinance by Reserve Bank of India

There are various types of refinance offered by RBI. Reserve Bank of India permitted the banks to offer refinance on various loans like home, auto etc. However, refinance companies have the restriction to use floating provisions instead of specific provisioning. Refinance by RBI is also offered to boost the growth of SMEs (Small and Medium Enterprises), especially those which are currently facing credit crunch. RBI also offers refinance facility to help out the exporters. In 2008, RBI offered credit lines of ` 5,000 crore to Export-Import Bank of India (Exim Bank) to support the export sector.

Export Credit Refinance Facility

RBI offers export credit refinance facility to the scheduled banks under Section 17(3A) of RBI Act 1934. Presently, credit refinance is offered up to 15% of the outstanding export credit. Repo Rate is applicable on the export credit refinance. The monthly payable interest is calculated on daily balances, which gets debited to the account. The maximum duration for repayment is 180 days. One can apply for an export credit refinance of Rupees one lakh and multiple of thereof.

Special Refinance Facility (SRF)

Special refinance facility was introduced under Section 17(3B) of RBI Act, 1934. It allows scheduled commercial banks (except Regional Rural Banks) to refinance up to 1% of Net Demand and Time Liabilities (NDTL) of each bank. Repo rate under LAF (Liquidity Adjustment Facility) is applicable for this facility. With effect from November 3, 2008, the rate lies at 7.5%.