RBI to set up panel on rising MSME stress

The Reserve Bank of India on Wednesday said that it has decided to set up an expert committee to examine the causes of increasing stress on micro, small and medium enterprises and oversee the problems with their finances.

The committee will be set up this month and give its report in June next year, RBI Deputy Governor N S Vishwanathan said at the post-policy presser.

“MSMEs contribute significantly to employment, entrepreneurship, and growth in the economy. They remain, by their pre-dominantly nature, vulnerable to structural and cyclical shocks, at times with persistent effects. It is important to understand the economic forces and transactions costs affecting the performance of MSMEs...,” the central bank said in a post-policy statement.

It also proposed a new method to benchmark floating loans to MSMEs.

The RBI proposed that all new floating rate for personal or retail loans and floating rate loans to MSMEs extended by banks from April 1 will be benchmarked either to policy repo rate or Government of India 91 days Treasury Bill yield produced by the Financial Benchmarks India Private Ltd (FBIL), or Government of India 182 days Treasury Bill yield produced by FBIL.

The move is expected to strengthen regulation and supervision over MSMEs and free-up liquidity for them.

The government has been demanding for a long time that the central bank eases credit and liquidity for small businesses and real estate in absence of which some of them may be forced to down their shutters.