Industry Bodies' Request to RBI for MSME Support
Micro, small, and medium enterprises (MSMEs) are urging the Reserve Bank of India (RBI) to extend and enhance support measures amidst challenges from US tariffs.
Key Proposals and Discussions
- Extension of ECLGS: The industry bodies proposed extending the Emergency Credit Line Guarantee Scheme (ECLGS) as a liquidity lifeline for MSMEs facing tariff-induced financial distress.
- Standardized Lending Framework: They advocated for a transparent, standardized lending process to ensure fair treatment and prevent viable enterprises from falling into distress.
Meeting Highlights
- The meeting was chaired by RBI Executive Director Neeraj Nigam and included industry associations like the India SME Forum and key banks such as State Bank of India and HDFC Bank.
- Sushma Morthania of the India SME Forum highlighted the issues faced by various sectors, including textiles and pharmaceuticals, due to unexpected tariff changes.
Specific Recommendations
- Transparent Application Interface: Creation of a transparent application interface within the RBI’s Unified Lending Interface (ULI) to ensure uniform loan processing and minimize discretion at the branch level.
- Differentiation in MSME Categorization: Distinguishing temporarily stressed MSMEs from chronic defaulters to facilitate tailored support under revival frameworks.
- Automatic Restructuring Eligibility: Proposing restructuring eligibility extensions for borrowers with strong repayment records, allowing proportionate 12-24 month extensions.
Capacity Building and Sensitization
- Emphasis on the need for capacity building for both MSMEs and bank executives through programs led by the RBI and IBA, in collaboration with MSME associations.
- Focus on sensitizing bankers to understand the operational realities faced by MSMEs.
The proposed measures aim to provide targeted support to MSMEs, ensuring their stability and resilience amidst external financial pressures.