RBI forms expert panel on MSME credit

The Reserve Bank of India (RBI) on Wednesday set up an expert committee to look into the issues of credit flow to the Micro, Small and Medium Enterprises (MSME) sector, under the chairmanship of former Sebi Chairman UK Sinha.

The committee, which has eight members, has been asked by the central bank to submit a report by the end of June 2019. The committee also includes two representatives from the government -- Ram Mohan Mishra, Additional Secretary, Development Commissioner MSME, and Pankaj Jain Joint Secretary, Department of Financial Services, Ministry of Finance. The committee also has representation from the public and private sector banks.

The mandate of the committee is to review the current institutional framework in place to support the MSME sector. It is also expected to study the impact of the recent economic reforms on the sector and identify the structural problems affecting its growth.

Other than this, the expert committee is also expected to examine the factors affecting the timely and adequate availability of finance to the sector and propose measures for leveraging technology in accelerating the growth of the sector.

The credit flow to MSME segment has been a major bone of contention between RBI and the central government, that considers the segment to be key vote bank in the build-up to the general elections.

Meanwhile, according to sources, the central bank governor Shaktikanta Das is expected to meet the representatives of the MSME sector in Delhi on January 7.

Massive restructuring

Meanwhile, after the central bank issued circular to the banks regarding the restructuring of advances to MSMEs, debt worth Rs 10,000 crore is expected to be restructured. “As per our estimates the MSME loans under the forbearance stood at less than Rs 10,000 crore for the banking sector as on September 30, 2018,” said Karthik Srinivasan, Group Head of rating agency Icra.

Credit to MSME entities (less than Rs 25 crore) stood at Rs 10.7 lakh crore for the banking sector, apart from Rs 2.5 lakh crore from other lenders.

“With loan restructuring window available till March 31, 2020, we expect that MSME entities that could avail the restructuring option can increase, as even the borrowers that were marginally overdue on their repayments will avail of such benefit as it will ease their cash flows by way of reduced debt repayments,” Srinivasan added.