Representatives of India’s vast MSME sector — welcoming the liquidity assistance measures announced by the Reserve Bank of India on Friday — have mentioned that the most recent incentives would place little enterprises back on the recovery path with quick relief from the working capital crisis. On Friday, the central bank had announced Rs 16,000 crore of unique liquidity assistance to SIDBI for on-lending or refinancing for up to one year to cater to MSMEs especially in credit-deficient and aspirational districts. The RBI had also enhanced the maximum aggregate exposure threshold from Rs 25 crore to Rs 50 crore for MSMEs, little firms, and person loans to allow more borrowers with debt restructuring below the Resolution Framework 2.. Moreover, a separate liquidity assistance of Rs 15,000 crore with tenure up to 3 years was announced for get in touch with-intensive sectors such as hospitality and ancillary services along with beauty and individual care segments till March 31, 2022.
“RBI’s move on extending Rs 15,000 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. This move will help these sectors tide over the cash crunch and working capital issues,” mentioned Manish Patel, Founder and CEO, Mswipe.
The RBI had in early May announced Resolution Framework 2. to let people, little firms, and MSMEs — with loans up to Rs 25 crore and who have not availed restructuring below Resolution Framework 1. and other people and had been classified as ‘Standard’ as on March 31, 2021 — avail one-time restructuring below the proposed framework till September 30, 2021. However, for these who had availed restructuring below Resolution Framework 1., Governor Shaktikanta Das had permitted banks to modify their plans to raise the period of the moratorium and/or extend the residual tenor up to a total of two years.
“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…The relief measures will catalyze MSME recovery and further stimulate financial stability in the economy,” Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital.
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Ever considering that the second wave of the pandemic struck post-mid-February this year, MSMEs, especially in retail such as the hospitality sector, have been demanding quick credit assistance to tide more than company losses due to lockdowns across the nation. The second wave had pulled down the recovery efforts of little firms nearing the pre-Covid level in company development.
“The RBI Governor’s statement continued the cautionary, calibrated, and need-of-the-hour stance of the RBI. Given the clear impact of 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. 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,” mentioned Anish Mashruwala, Partner, J Sagar Associates.
The central bank had categorically cited in its statement on Friday that hotels and restaurants, travel agents, tour operators, and adventure/heritage facilities, aviation ancillary services such as ground handling and provide chain, and other services that include things like private bus operators, automobile repair services, rent-a-automobile service providers, occasion/conference organisers, spa clinics, and beauty parlours or saloons are the get in touch with-intensive sectors for which the separate Rs 15,000 liquidity window has been opened. While the business body Federation of Hotel & Restaurant Associations of India (FHRAI) welcomed the move, it requested the RBI to extend the tenure from 3 years to 5 years.
“Infusing liquidity will provide the much-needed liquidity support to cash-strapped hospitality businesses without which the industry couldn’t have survived. However, we request the RBI to extend the tenure for at least five years. A duration of three years is just not sufficient to recover from the financial turbulence that the industry is going through…The Hospitality sector was at the brink of collapse with revenues dwindling to below 10 per cent of pre-COVID levels. The announcement has offered the industry a lifeline in its efforts to survive,” mentioned Gurbaxish Singh Kohli, Vice President, FHRAI.