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GST: RBI proposes expert panel to study MSME distress - GST Station

GST: RBI proposes expert panel to study MSME distress

GST: RBI proposes expert panel to study MSME distress

    MUMBAI: The Reserve Bank of India (RBI) expressed concerns over the increasing stress in the micro, small and medium enterprises industry, seeking a comprehensive approach to assess the problems faced by businesses that employ thousands of people in the unorganised sector across the country.

    To identify causes and propose longterm solutions for the economic and financial sustainability of the MSME sector, RBI will constitute an expert committee. The composition of the committee and its terms of reference will be finalised by the end of December, and the report will be submitted by the end of June 2019.

    “In order to enable the MSMEs tide over the impact of demonetisation and GST, RBI undertook regulatory forbearance in prudential norms,” said M K Jain, RBI deputy governor, after Wednesday’s bimonthly monetary policy announcement. “The increasing stress in the sector is a matter of concern. A comprehensive approach needs to be adopted to understand the problems of the MSMEs and the challenges faced by them for a holistic development of the sector.”

    The MSME sector contributes to nearly a third of the gross domestic product and employs 111 million people, accounting for about 45 per cent of manufacturing output and 40 per cent of total exports, data from RBI showed. RBI said that many MSMEs exist outside of the formal space and face difficulty in accessing credit.

    RBI has taken several steps, such as setting up a trades receivables discounting system and allowing banks to co-originate loans with non-banking finance companies, to facilitate the flow of credit to the sector. With the liquidity squeeze in the NBFC sector, credit flow to MSMEs is understood to have taken a hit. MSMEs have relied on NBFCs in the past two decades to finance their expansion. On Nov 19, the RBI board had advised the central bank management to consider a scheme for the restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to ?25 crore, subject to conditions that would ensure financial stability.

    Source- Economic Times.

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