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