Reserve Bank of India Current Affairs - 2020

Scheme with Guarantee Cover worth Rs 20,000 Crore launched for MSMEs

This scheme was announced as a part of the AtmaNirbhar Bharat Package by Finance Minister back on 13th May 2020. On 24th June 2020, the Credit Guarantee Scheme for Sub-ordinate Debt (CGSSD) was launched. The scheme is also called as Distressed Assets Fund- Sub- Ordinate Debt for MSMEs.

Union Minister of Medium, Small and Marginal Enterprises (MSMEs) Nitin Gadkari launched the scheme. After consultation with the Reserve Bank of India, SIDBI, and the Ministry of Finance, the scheme was approved by the Committee on Economic Affairs.

Background

As a result of nationwide lockdown to contain the spread of COVID-19, most of the economic activities came to a halt across the globe. In India as well, the livelihood of millions of people is dependent on the MSME sector.

As per data available to the Government, the biggest challenge that was faced by these MSMEs was in getting capital for restarting their businesses.

About the Scheme

The scheme will provide support to about 2 lakh MSMEs across the country. Rs 20,000 crores of guarantee cover have been sanctioned under the scheme.

The guarantee cover under the scheme will be provided from banks to the promoters. Only those promoters, who’s MSMEs have either become a Non-Performing Asset (NPA) or are financially stressed as on 30th April 2020 will be eligible for the scheme.

Through Credit Guarantee Fund Trust for Mirco and Small Enterprises (MSEs), the scheme will be implemented.

India becomes 12th Largest Holder of US Government Securities at April 2020 end

Despite low returns, the Treasury Securities (are of four types- Bills, Notes, Bonds, Inflation-Protected Securities) backed by the United States Treasury Department is one of the safest assets for any Central Bank around the world. With USD 157.4 billion at the end of April 2020, India has become the 12th largest holder of United States Government Securities.

India’s holding touched an all-time record high of USD 177.5 billion at the end of February 2020 but was reduced to USD 156.5 billion at the end of March 2020. This significant drop was due to the financial impact of the global COVID-19 pandemic. As economic uncertainties increased following lockdowns in most countries across the world, securities were sold by India in the month of March.

How the Indian Government invests in US Government Securities?

On behalf of the Government of India, India’s Central bank- The Reserve Bank of India (RBI) invests in foreign assets. These foreign investments are part of prudential liquidity management.

Top 5 Countries as per US Government Security holdings (at the end of April 2020)

  1. Japan- USD 1.266 Trillion
  2. China- USD 1.073 Trillion
  3. United Kingdom- USD 368.5 Billion
  4. Ireland- USD 300.2 Billion
  5. Luxembourg- USD 265.5 Billion