SME Times News Bureau | 06 Dec, 2018
on Monday announced it is constituting an expert committee to identify causes
and proposed long-term solutions for the economic and financial sustainability
of the MSMEs.
expert committee will submit its report by the end of June 2019, the
constitution of the panel will be finalised by the end of this month, RBI
Deputy Governor B.P. Kanungo said at a press conference here to announce the
RBI's fifth monetary policy review of the fiscal.
(MSMEs) remain, by their predominantly informal nature, vulnerable to structural
and cyclical shocks, at times with persistent effects. It is important to
understand the economic forces and transaction costs affecting the performance
of the MSMEs," he said.
"To this end, an expert committee will be constituted by the RBI to
identify causes and propose long-term solutions for the economic and financial
sustainability of the MSME sector."
RBI also said there will be a new external benchmarking of floating rate loans
by banks to micro, small and medium enterprises (MSMEs) from the next fiscal,
in a measure designed to strengthen regulation and supervision of the sector.
On the basis of recommendations made by another expert committee, the RBI
announced that external benchmarks would be used by banks for their floating
rate loans instead of the present system of internal benchmarks like the Prime
Lending Rate (PLR), Benchmark Prime Lending Rate (BPLR), Base Rate and Marginal
Cost of Funds-based Lending Rate (MCLR),
"As a step in that direction, it is proposed that all new floating rates
for personal or retail loans (housing, auto, etc.) and floating rate loans to
micro and small enterprises extended by banks from April 1, 2019 shall be
benchmarked to one of the following:
"Reserve Bank policy repo rate, or Government of India 91 days Treasury
Bill yield produced by the Financial Benchmarks India Ltd (FBIL), or Government
of India 182 days Treasury Bill yield produced by the FBIL, or any other benchmark
market interest rate produced by the FBIL," an RBI release said .
"The spread over the benchmark rate -- to be decided wholly at banks'
discretion at the inception of the loan -- should remain unchanged through the
life of the loan, unless the borrower's credit assessment undergoes a
substantial change and as agreed upon in the loan contract," it added.