Well, this week hasn't begun with a good note. In a surprise move, RBI Governor Urjit Patel on Monday resigned from his post with immediate effect. He cited "personal reasons" for the decision, but still raising a lot of speculation about the ongoing conflict between the central bank and the Centre, over several serious issues, which include, among others, how to increase liquidity so that credit flow can be increased to the industry, especially MSMEs.

While it is not the intention here to discuss the Government vs. RBI debate further, one thing is fairly clear by now that credit flow is still tight and there is an urgent need to address this concern. A recent Business Confidence Survey finds that the proportion of respondents, citing the cost of credit and availability of credit as a major constraining factor, has gone up to 60 percent and 48 percent respectively. In such a situation, there is naturally a growing demand for more credit to the industry.

Meanwhile, another trade body has recently pointed that red tape is no less responsible for this crisis. It adds that PSU bank officials are not accessible to exporters, particularly from the MSME sector. Additionally, they demand bundles of documents and collateral for considering applications for even smaller limit of loans. Even if granted, it takes months to get these limits approved. Similarly, the government-owned ECGC is very reluctant to extend insurance cover to exporters and it rejects claims on flimsy grounds.

There is no doubt that liquidity stress in sectors like banking, NBFC and housing finance needs to be urgently addressed to help our MSMEs get more credit, and a solution to this problem will depend on finding a balanced approach based on both "empirical evidence" as well as sound theories. But at the same time it is equally important to take complementary steps in order to smoothen the credit delivery mechanism, so that we can at least make the best of the resources that we already have.

I invite your opinions.