On expected lines, the Reserve Bank of India (RBI) last week decided to continue with its accommodative stance and maintained the repo rate at 4 percent also with the reverse repo rate kept unchanged at 3.35 percent. This move was widely expected in the background of prevailing onslaught from the second wave of Covid-19 as well as persistently high prices. The MPC decision, along with some other measures favourable for small businesses, are welcome.
In a bid to provide a much-needed credit flow support to micro, small and medium enterprises, the central bank announced a special liquidity facility of Rs 16,000 crore for SIDBI, which comes over and above the Rs 15,000 crore liquidity support announced in April. RBI said that the move is aimed at helping MSMEs, particularly smaller ones and other businesses including those in credit deficient and aspirational districts. No doubt, this move is encouraging.
Additionally, the loan restructuring limit for MSMEs and small borrowers has been doubled to Rs 50 crore. The central bank said that this coverage expansion will enable a larger set of borrowers to avail of the benefits under Resolution Framework 2.0. This move, aimed at MSMEs, non-MSME small businesses and loans to individuals for business purposes, will definitely provide relief to small enterprises hit by the second wave of the pandemic.