Restarting Economy and Role of NBFC & MSME

Restarting the Economy

While a drastic shutdown of business has been a key part of tackling the COVID-19 pandemic, the economic fallout is spiraling, with almost 10 million people filing for unemployment in the last two weeks of March and markets dropping precipitously. A key question now is how to restart the economy safely and efficiently when the time comes.
Restarting the economy is especially important to prevent a prolonged recession that would take a severe toll on poor and vulnerable people.“We are going to have to restart the economy starting from a depression-level situation, But How?

Role of NBFC & MSME

India is a country where procuring a loan, is a process which is not just confined to the boundaries of a bank. Banks with all their corporate glamour and credit rating criteria may intimidate a common citizen of our country, which in most parts, still remains a ‘developing country’. Indians are known worldwide for their creativity when it comes to finding a ‘Jugaad’, a colloquial Hindi term for finding a hack to a challenging situation

In this situation, NBFCs are the real practical institution that sends money to market. But NBFCs and Micro Finance are struggling to survive as the corona takes its toll. So, to deal with the situation RBI is already considering to increase the credit limit of NBFCs.

MSMEs are finding NBFCs more helpful in providing immediate credit facilities with least formalities of documentations. The non-bank lenders have asked their branches to reach out to the customers in need of loans and boost credit to MSMEs. Such flexible scenarios made such organizations seem lucrative to Indian masses, so much so that it made the people overlook the higher interest rates.Their flexibility in functioning serves them the advantage of being able to serve a broader range of clientele. For instance multiple NBFC’s are setup with the motive of funding only a particular kind of a business, currently there are NBFC’s dedicated towards helping businesses pertaining to power generation, transport and so many more.

The Indian banking scenario is currently at a critical juncture with a surge in loan amounts to corporate entities; it was improbable that the NBFC business would go through unscathed and they certainly have borne the brunt of it too.


Suggestions, comments and  advices will be highly appriciated.    - CA Mukesh Yadav

Comments

Post a Comment

Popular posts from this blog

RBI cut REPO Rate by 40bps - Its Meaning and Effect on our EMIs

Image
Meaning of REPO Rate: Repo rate is the rate at which the Central Bank (RBI in case of India), lends money to the commercial banks in the case of fund shortfall. In the event of inflation, RBI increases the Repo Rate as a result of which Commercial Banks find it difficuilt to borrow fund from RBI, which further results in shortfall of fund with the Banks and ultimately to the public. Increased Repo rate arrests the flow of fund from banks to public and from public to market and this is how Inflation is encountered.   BRIEF ABOUT RATE CU T BY 40 BPS Mr. Shaktikanta, the Governer of RBI, on 22th May 2020 ,  has announced reduction in the repo rate under the liquidity adjustment facility by 40 bps to 4.0 per cent from 4.40 per cent earlier, with immediate effect. This means, RBI wants Commercial Banks to provide fund to public at reduced rate.  On 27 March 2020, the Reserve Bank of India (RBI) reduced the repo rate by 75 basis points (bps). The reduction saw the repo
Read more

Story of INR 20000000000000

Image
Background "A special economic package is being announced to make India self-reliant," Modi said in his third address to the nation over COVID-19 pandemic. "This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10 per cent of India's GDP." Most economic activity in the country had come to a standstill after the government imposed a 21-day nationwide lockdown beginning March 25 to check the spread of coronavirus. The lockdown has since been extended twice through May 17, with some relaxations to allow the resumption of economic activity. The package, he said, will focus on land, labour, liquidity and laws. It will cater to various sections, including cottage industry, MSMEs, labourers, middle class, and industries. BRIEF STORY The blue-print of INR 20000000000000 economic package has been presented by Honorable FM of India
Read more