Additional liquidity extended to SIDBI is among significant steps for MSMEs
The decision of the RBI Monetary Policy Committee to stay on course with the accommodative stance with a focus on the ‘equitable distribution’ of liquidity sends an important message from the central bank to be reaching out to those affected the most by Covid-19 pandemic, through increased and wider windows for soft lendings.
While keeping the benchmark REPO rates unchanged at 4% was on the expected lines, extension of Rs.15,000 crore special liquidity window for contact-intensive sectors would help job-oriented sectors, particularly amongst the MSMEs, ASSOCHAM Secretary General Deepak Sood said in comments on the RBI’s 4 June decision.
The sectors include hotels, restaurants, travel agents, tour operators, aviation ancillary services, rent-a-car operators, spas, and salons.
Another window of Rs.16,000 crore for MSMEs through SIDBI would enable financial institutions to reach out to the smaller business entities in this hour of difficulty, he pointed out.
“The increase in the threshold to Rs.50 crore from Rs.25 crore for Resolution Framework 2.0 is a pragmatic decision and would help ease the pressure off the small to mid-sized entities,” he said.
“We would like to thank RBI governor Shaktikant Das for accepting ASSOCHAM’s recommendations to provide urgent relief to the worst impacted hospitality sector and extend support to the struggling MSME segment”.
Sood said the decision to enhance the G-SAP limit to Rs.1.20 lakh crore in the second quarter of the current fiscal is a firm signal to the money market of the RBI being in command of the situation even in the midst of a global health emergency.
“RBI has been stellar in its performance right through this pandemic crisis with the result that all participants of the financial markets – stocks, bonds, banks, forex – have shown a great amount of resilience and adaptability to the ever-changing situation. Its coordination with the government has been excellent with the result that the fiscal and monetary arms of the system are in perfect sync to face the storm”.
The RBI’s macro projections of 9.5% growth and retail inflation of 5.1% for FY’ 22 are in line with the current situation marked by calibrated opening of the economy, to be helped by increasing penetration of vaccination and the ensuing uptick in the rural demand, added Sood.
Separately, but reflecting the general businesses response FICCI President Uday Shankar said, “Central Bank’s consistency and approach towards managing the current challenges both economic and those on health front is laudable.
“The latter was clearly reflected in the announcement made earlier last month. This time around we are happy to note the emphasis on relieving the stress faced by MSMEs. The second wave has had a debilitating impact and in this hour of need all levers must be pulled to support our MSMEs. We also welcome the accommodative stance of the Bank.”
Further, the support given to the contact-based services like hotels, restaurants, tourism, aviation ancillary services, spas and parlours through the Rs.15,000 crore separate liquidity window should provide some relief to the sector, he hoped.
“The additional liquidity facility extended to SIDBI, expanded coverage under Resolution Framework 2.0 to borrowers up to Rs.50 crores and the allowance to Regional Rural Banks to issues CDs are significant steps for micro and small enterprises. We appreciate the Reserve Bank of India’s constant endeavour to ease the conditions for these severely hit enterprises,” Shankar said.
While this signalling is critical and timely, effective liquidity transmission calls for a proactive approach from the banks, since banks are the key intermediaries for implementing many of the announcements made by RBI.
“In this time of crisis, FICCI would urge members of the banking fraternity to double up their efforts and support the corporate sector including the MSMEs across manufacturing and services leveraging all policies announced by the government and RBI in a swift manner so that the intended benefits reach the targeted groups quickly,” said Shankar. #economy #investment #banking #rates #industries /fiinews.com
