Tag: Reserve Bank of India

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Finance

Financial Policy Normalization Likely To Begin By The End Of FY22

Financial Policy Normalization Likely To Begin By The End Of FY22
Financial Policy Normalization Likely To Begin By The End Of FY22

With the interest rates continually declining, the Reserve Bank of India may start tightening the monetary policy. The gradual normalization of the policy is likely to begin by the end of this financial year.

While the CPI inflation moderated marginally to 6.26 percent, the retail inflation declined in June but remained above the 6 percent threshold for the second consecutive month.

A Kotak report noted that a peak in inflation may provide comfort to MPC.

“Softer-than-expected CPI inflation along with broad-based moderation in core inflation is expected to provide relief to the MPC to continue with the pro-growth policy guidance in the near term. While much depends on the incoming data, we expect the onset of gradual policy normalization towards the end of FY2022,” it said.

Core inflation (CPI excluding food, fuel, and pan, tobacco) moderated to 6.2 percent, with flat sequential momentum following a surge of 1.5 percent M-oM in May. After a broad-based increase in the components of core inflation in May, prices have risen a lot lesser in June across all categories except transport and communication.

“We expect core inflation to average 6.1 percent in FY2022 (5.3 percent in FY2021) amid pass-through of global commodity prices and pickup in demand across various services sectors through FY2022,” it said.

While the headline inflation remains elevated above MPC’s upper threshold of 6 percent, the June print suggests that inflation may have peaked and the trajectory in 3QFY22 will moderate towards an average of 4.7 percent.

“We expect RBI to continue to maintain a pro-growth bias in the August policy focus given that a large part of the increase remains supply-driven and, hence, transitory in nature,” it said.

However, as economic activity begins to normalize with progress in vaccination, RBI’s room to ignore the inflationary risks, as well as a closing of the negative output gap, will be restricted, prompting gradual monetary policy normalization from October, although much will depend on the evolution of the pandemic, vaccination, and data, it said.

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MSME

Emergency Credit Line Guarantee Scheme 2.0 Now Extended to SMA-1 Borrowers

ECLGS Now Applicable to SMA-1 | Representational Image
ECLGS Now Applicable to SMA-1 | Representational Image

The Department of Financial Services said in a tweet that the scope of Emergency Credit Line Guarantee Scheme (ECLGS) 2.0 has now been extended to cover the Special Mention Accounts- 1 (SMA). The DFS took to Twitter and wrote, “Scope of ECLGS 2.0 expanded! SMA-1 borrowers in the healthcare sector and 26 other high stress sectors (as identified by the Kamath Committee) are now eligible under ECLGS 2.0.” The Emergency Credit Line Guarantee Scheme 2.0 was launched by the government to help the business, especially firms in the micro, small and medium sector in wake of coronavirus pandemic last year. Emergency Credit Line Guarantee Scheme: What is ECLGS? Are You Eligible? Know All About It.

The scheme comprises all micro, small and medium borrowers accounts with combined outstanding loans across all MLIs (member lending institution) of up to Rs 50 crore in any sector and up to Rs 500 crore in respect of borrowers in the hospitality sector, travel and tourism sector and leisure and sporting sector and classified as regular, Special Mention Accounts-0 or Special Mention Accounts-1 as on February 29, 2020, according to the scheme’s website. MSME Credit Moves Towards Pre-Pandemic Levels, Witnesses a Growth of 5.7%: Report.

The Special Mention Accounts (SMA) are those which are exhibiting signs of incipient stress resulting in the borrowers defaulting in timely servicing of their debt and borrowing obligations, though the accounts have not yet been classified as Non Performing Assets (NPAs) according to the guidelines issued by the Reserve Bank of India. In the case of Special Mention Accounts-1, the overdue period is between 31 to 60 days.

The amount of Emergency Credit line to be extended to Business Enterprises or the firms in the micro, small and medium enterprises would be upto 20 per cent of total outstanding as on Feb 29,2020. The interest rate charged on such borrowing is capped at 9.25 per cent for banks and 14 per cent for the Non-Banking Financial Corporations (NBFCs). It has a maximum tenure of four years from the date of disbursement and the moratorium period on the principle amount is 12 months.

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MSME

MSME Sector ‘Growth Engine’ of Indian Economy, Contributes around 30% to GDP, Says RBI Governor Shaktikanta Das

RBI Governor Shaktikanta Das (Photo Credits: Wikimedia Commons)

The Micro, Small and Medium Enterprises have been gaining momentum in past few years. Government at various levels, the MSME Ministry, Public Sector Banks, and NBFCs among other state agencies have been implementing several initiatives for the development of the sector and encourage more and more people to establish their businesses in the MSME sector. The sector did suffer owing to the coronavirus outbreak and the subsequent lockdown, which lead to curb on all the economic activities across the country. However, the various micro, small and medium enterprises are now on the path of revival and will soon bloom to its full potential soon again. Union Budget 2021: Here Is What the First Paperless Budget Has In Store for the MSME Sector.

Addressing the 185th Foundation Day Celebration of Bombay Chamber of Commerce and Industry, Governor of the Reserve Bank of India Shaktikanta Das said that the Micro, Small and Medium Enterprises (MSME) sector has emerged as the growth engine of the economy and is showing signs of revival after the COVID-led degrowth in early part of the current financial year (2020-21). Das added that the sector has been rendered vulnerable by the pandemic necessitating concerted effected effects to combat the stress and focus on the revival of the sector.

He informed that MSME sector -a vast network of around 6.33 Crore enterprises- is contributing about 30 per cent of the nominal Gross Domestic Product (GDP) of the country and 48 per cent to the total exports of India. “As digital capabilities improve and connectivity becomes omnipresent technological innovation and technology-driven revolution are poised to quickly and radically change India’s economy,”said Das. Adding that the Reserve Bank of India has also made necessary intervention to support economy’s critical sector- referring to the micro, small and medium enterprises. Major Boost to MSME Sector: Govt Trying to Make 5,000 MSME Clusters Under SFURTI Initiate, Says Union Minister Nitin Gadkari.

Meanwhile, the central government on its end has also been contributing towards the development of the MSME sector. In the Union Budget for the upcoming financial year 2021-22, Finance Minister Nirmala Sitharaman has proposed an allocation of a fund of over Rs 15,000 Crore to the Micro, Small and Medium Enterprises, which stands at double the amount apportioned to the sector last fiscal. A reduction in the custom duties has also been proposed, with duties on semis, flat, and long products of non-alloy, alloy, and stainless steels has been reduced to 7.5 per cent uniformly.

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Finance

MSMEs Who Are Still Under Financial Stress May Get Another 6-Month Moratorium on Loan Principal Repayment

Currency (Photo Credits: Piklist)

Mumbai, September 2: Micro, small and medium enterprises (MSMEs) and Retail borrowers who are still under financial stress amid the coronavirus pandemic and are unable to repay their loans even after availing the 6-month moratorium provided by the Reserve Bank of India, may get another six-month moratorium only for principal repayments.

The news reported by Economic Times mentioned that Banks and NBFCs may give six-month moratorium on principal repayments for retail and MSME borrowers. The intention is to restructure loans for only those borrowers who really need restructuring, according to reports.

The six-month moratorium on loan repayments ended on August 31. However, borrowers who still feel that they can not start loan repayment now can approach their lenders for the restructuring of their loan.

The Reserve Bank of India recently extended the existing debt restructuring scheme for stressed MSMEs by three months to March 31, 2021, in view of the distress brought upon by the COVID-19 outbreak

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Finance MSME Startup

Ministry of MSME Issues Circular Stating RBI’s Criteria for Classification of Enterprises Under MSMED Act, 2006, Here Are the Details

Ministry of MSME
Ministry of MSME (Photo Credit: PIB)

New Delhi, August 24: The Ministry of Micro, Small and Medium and Medium Enterprises on Monday issued the Reserve Bank of India’s notification for clarifications of small and medium and medium enterprises in the country. The re-classification of MSMEs have been done by the Union government under the Micro Small and Medium Enterprises Development Act, 2006 and is effective from July 1, 2020.

Under the Gazette notification, released by the RBI and reissued by Ministry of MSMEs, several criteria have been mentioned which contains the definition of Micro, Small and Medium Enterprises as per Section 7 (I) of the MSMED Act, 2006.

Definition of MSMEs under MSMED Act:

Micro Enterprise: A firm where the investment in plant and machinery or equipment does not exceed Rs 1 crore. Also, turnover does not exceed Rs 5 crore.

Small Enterprise: A firm where the investment in plant and machinery or equipment does not exceed Rs 10 crore. Also, turnover does not exceed Rs 50 crore.

Medium Enterprise: A firm where the investment in plant and machinery or equipment does not exceed Rs 50 crore. Also, turnover does not exceed Rs 250 crore.

Apart from this, the RBI notification mentioned composite criterion of investment and turnover for the classification of MSMEs. It says that if an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category.

The notification said that all the enterprises — whose Goods and Services Tax Identification Number (GSTIN) are listed against the
same Permanent Account Number (PAN) — will be collectively treated as one enterprise. Adding more, it said that the turnover and investment figures for all of those entities will be seen together and only the aggregate values will be considered for classification of MSMEs.

Calculation of Turnover:

For the calculation of investment in plant and machinery or equipment in an enterprise, RBI said that it will link Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961. For new enterprises — whose ITR details are not available — the investment will be based on self-declaration of the promoter of the enterprise.

However, those relaxations will end after the March 31 of the financial year in which it files its first ITR. Also, purchase — invoice — the value of a plant and machinery or equipment will be taken into account excluding GST — on self-disclosure basis — if the enterprise is a new one without any ITR.

Among other details, RBI said that it will exclude exports of goods or services or both while calculating the turnover of any enterprise for MSMEs for classification. Adding more, RBI circular stated that information related with turnover and exports turnover for an enterprise will be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN. For an enterprise, who don’t have PAN, their turnover will be considered on a self-declaration basis for a period up to March 31, 2021. Following this, PAN and GSTIN will be mandatory.

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Finance Legal Startup

RBI Extends Deadline For Udyog Aadhaar Memorandum of MSME Registrations Till March 31, 2021

Reserve Bank of India
Reserve Bank of India. (Photo Credit: Facebook)

New Delhi, August 24: The Reserve Bank of India on Monday extended the validity of Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) from June 30, 2020, to March 31, 2021. The RBI circular even stated that all the enterprises are required to register online and obtain ‘Udyam Registration Certificate’ to be classified as MSME as per new definition.

Issuing the circular, RBI said, “The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020, shall remain valid till March 31, 2021. Further, all enterprises registered till June 30, 2020, shall file new registration in the Udyam Registration Portal well before March 31, 2021.”

Adding more, the circular noted, “‘Udyam Registration Certificate’ issued on self-declaration basis for enterprises exempted from filing GSTR and/or ITR returns will be valid for the time being, up to March 31, 2021.”

Following this, the Ministry of MSME said that the registration for Udyog Aadhaar Memorandum website is up and the registrations are underway. The Ministry said that the need for a document for classification purpose has been dispensed for a paperless approach.

Here’s what MSME tweeted:

Apart from this, the Ministry of MSMEs said in its circular that classification and re-classification of MSMEs is the statutory responsibility of the government. These classifications are done as per the provisions of the MSMED Act, 2006. With this, all lenders will have to obtain ‘Udyam Registration Certificate’ from the entrepreneurs.