The MSME sector believes the latest incentives would put small entrepreneurs back on the recovery path with immediate relief from the working capital crisis. The Reserve Bank of India, on Friday, announced Rs 16,000 crore of special liquidity support to SIDBI for on-lending or refinancing for up to one year to cater to MSMEs particularly in credit-deficient and aspirational districts.
Manish Patel, Founder and CEO, Mswipe, told Financial Express that the central bank’s move on extending the Rs 16,000 crore liquidity window for contact intensive sectors comes as a huge relief to MSMEs. “While the lockdown-like restrictions will continue to impact the hospitality industry, the travel industry, and the beauty and salon segment for the coming months as well, merchants will continue to face revenue pressures,” he said. “This move will help these sectors tide over the cash crunch and working capital issues.”
Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, said RBI has decided to extend a special liquidity facility of Rs 16,000 crore to SIDBI for on-lending, refinancing through novel models and structures. “The impact will be visible in ensuring sustained credit flow in the real economy. Further expanding the Resolution Framework 2.0 to Rs 50 crore will extend the credit coverage to a higher number of individuals and businesses,” he explained. “The relief measures will catalyze MSME recovery and further stimulate financial stability in the economy.”
Anish Mashruwala, Partner, J Sagar Associates, said the RBI Governor’s statement continued the cautionary, calibrated and need-of-the-hour stance of the central bank. “Given the clear impact of the COVID-19’s second wave on non-urban areas, the focus on the wider local economy, especially the MSME and the mom and pop shops which are still vital to the overall fabric of India, has been a major focus of the proposed measures,” he said. “Having addressed the creation and supply of liquidity, the RBI has consciously considered the need to ensure equal distribution of credit and liquidity to the particularly affected sectors.”
The RBI has enhanced the maximum aggregate exposure threshold from Rs 25 crore to Rs 5 crore for MSMEs, small businesses and individual loans to enable more borrowers with debt restructuring under the Resolution Framework 2.0. Moreover, a separate liquidity support of Rs 15,000 crore with tenure up to three years was announced for contact-intensive sectors such as hospitality and ancillary services along with beauty and personal care segments till March 31, 2022.
In early May, the central bank announced Resolution Framework 2.0 to allow individuals, small businesses and MSMEs with loans up to Rs 25 crore and who have no availed restructuring under Resolution Framework 1.0 and others, and were classified as standard as on March 31, 2021, avail one-time restructuring under the proposed framework till September 30, 2021. For those who had availed restructuring under Resolution Framework 1.0, RBI had allowed banks to modify their plans to increase the period of the moratorium and/or extend the residual tenor up to a total of two years.