FICCI on RBI Monetary Policy: Incentivisation of new credit flow towards MSME borrowers a big positive


Commenting on the monetary policy announcement Uday Shankar, President, FICCI said, “The direction of the policy statement is positive. It is reassuring to note that the RBI continues with its accommodative stance to accelerate economic growth.  The recovery signs are getting stronger and the guidance provided by the Central Bank reflects its commitment towards supporting growth.”

Uday Shankar“We are encouraged to note the support offered by the Reserve Bank of India through the broad mix of regulatory measures today. The assurance and the clear communication by the Governor with regard to liquidity management and the government borrowing programme infuses optimism. The Central Bank is seen using all available policy tools to keep the liquidity at optimum levels. While CRR rates have been elbowed towards gradual normalization, the MSF relaxation and SLR holdings in HTM category have been extended.

“We see that both the Government and the Central Bank are moving in tandem – which is the need of the hour. The innovative measures and reformist approach to meet the borrowings programme of the government is indeed laudable.

“We are particularly happy to note the inclusion of NBFCs in the TLTRO on tap scheme for specified stressed sectors. NBFCs have emerged as a major source of organized lending especially for the MSMEs and play a vital role. However, we have noted that banks continue to favor high rated NBFCs and this distortion needs to be corrected to ensure a broad-based outreach.

“Also, the incentivisation of new credit flow to the micro, small, and medium enterprise (MSME) borrowers is a big positive and indicates the targeted approach towards meeting the needs of the most stressed. MSMEs have been reeling under tremendous pressure and this measure should further nudge the banks to lend to these enterprises.

“Allowing of retail investors to open gilt accounts with the Reserve Bank marks a huge structural change and places India amid few selected countries with a similar facility giving this category of investor an opportunity to participate in GILT market directly ,” Shankar added.

Views of other industry leaders on RBI Monetary Policy:

Dr. Rashmi Saluja, Executive Chairperson, Religare Enterprises Ltd

image-Dr.-Rashmi-Saluja-Executive-Chairperson-Religare-Enterprises-Ltd-mediabrief.jpgThe RBI kept benchmark repo rate unchanged at 4% in line with expectations. At the same time, the central bank has promised to maintain accommodative stance to support economic recovery and ensure growth doesn’t stutter due to lack of adequate liquidity and high interest rates. While inflation is currently within RBI’s tolerance level, high fuel prices and escalating inputs costs for manufacturing sector need to be monitored. This is certainly a tight rope walk for RBI this year, particularly because of government’s record borrowing plan for FY22. Given NBFCs’ strong last mile connectivity, the decision to allow the segment to access funds under on tap TLTRO scheme is a welcome move as it will provide liquidity for further lending to key sectors at lower rates.

Tirthankar Datta, Partner, J Sagar Associates 

image-Tirthankar-Datta-Partner-J-Sagar-Associates-mediabrief.jpgThe announcement by the RBI Governor on inclusion of NBFCs in the on tap Targeted Long Term Repo (TLTRO) Scheme of the Government will be a much needed fillip for the NBFC sector after it had been reeling from a liquidity crunch since the IL&FS default in 2018 which was exacerbated by the pandemic. This is a great growth oriented and stabilising measure and in line with the NBFC sector’s demands, instead of trying to stem the liquidity to address inflation concerns.

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