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RBI Measures For MSMEs, Contact-intensive Sectors Augur Well For Economy
RBI's additional measures for MSMEs, contact-intensive sectors and digital transactions augurs well for the overall economic health, financial market participants said on Thursday.
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A status quo in repo rate underlines RBI's priority in supporting GDP growth amid the lingering impact of the pandemic, while additional measures for MSMEs, contact-intensive sectors and digital transactions augurs well for the overall economic health, financial market participants said on Thursday.
For the 10th time in a row, the six-member rate setting Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept the key repo rate unchanged at 4 per cent, mainly to support growth as well as to manage inflationary pressure.
The MPC decided, with a 5 to 1 majority, to continue the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy.
The monetary policy stance of the central bank suggests that it will follow a more calibrated approach towards policy normalisation.
George Alexander Muthoot, MD, Muthoot Finance said: "We are hopeful and optimistic about broad-based economic revival in 2022 as both RBI and the government are working together to revive and sustain growth on a durable basis post the challenges posed by the pandemic. We welcome RBI's stance of enabling better infrastructure for MSME receivables and extension of on-tap liquidity window for contact-intensive sectors."
Continuing the accommodative stance means RBI and the government still want to prioritize economic recovery above all else, Sandeep Bhardwaj, CEO, Retail, IIFL Securities said.
Payments and financial technology solutions provider Euronet Worldwide's MD, India and South Asia, Pranay Jhaveri said RBI's decision to raise the e-RUPI limit to Rs 1 lakh would accelerate DBT (direct benefit transfer) dissemination by the government and allow accrual, ultimately resulting in improved welfare of the underprivileged section of the economy.
The Reserve Bank on Thursday increased the cap on the e-RUPI prepaid digital vouchers to Rs 1 lakh from Rs 10,000 and permitted its usage multiple times to facilitate digital delivery of various government schemes to the beneficiaries.
The e-RUPI is a prepaid digital voucher, developed by the National Payments Corporation of India (NPCI).
Built on UPI rails, e-RUPI removes friction, works in an offline mode, and enables the large population of people receiving DBT to grow their digital payments footprint.
RBI has also decided to raise the limit for MSME financing on TReDS platform to Rs 3 crore from Rs 1 crore.
"The increase in NACH (National Automated Clearing House) limit to Rs 3 crore is a welcome move from RBI as we receive frequent requests to handle invoices up to Rs 8-10 crore and onwards at RXIL.
"The increased limit, on the other hand, will help MSME financing because it will make it easier to submit fewer invoices given the revised limit of Rs 3 crore. We hope in the near future RBI will consider our recommendation to raise this limit to Rs 5 crore," Ketan Gaikwad, CEO and MD of RXIL (TReDS platform) said.
Arun Singh, Global Chief Economist, Dun & Bradstreet said the extension of on-tap liquidity for emergency health services and contact-intensive sectors, and increase in NACH limit for TReDS related settlements will provide some respite to MSMEs.
The status quo on repo rate will accelerate growth momentum in the economy and it remains committed to supporting sustained growth activity, Rajiv Sabharwal, MD & CEO, Tata Capital Ltd said.
"The recent spike in crude oil prices and the spillover effect on the inflation trajectory is being monitored closely by RBI. The softening in food inflation and strong agricultural output will help manage inflation within the comfort corridor of RBI," Sabharwal said.
The accommodative stance indicates that there will be no aggressive rate hikes in 2022, which is a positive for consumers, Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance said.
"Any hike in rates would have impacted MSMEs which are in revival mode. Both the RBI and the government with its thrust on capital spending in the recent budget are working in tandem to revive and support broad based economic recovery," he added.
With RBI Governor Shaktikanta Das dousing fears of premature tightening and no additional MPC member voting for a stance change, a shift to a neutral stance in April 2022 appears to be ruled out, unless the CPI inflation exceeds the upper threshold of 6 per cent in both January and February 2022, Aditi Nayar, Chief Economist, ICRA said.
"MPC's forecast of a 4.3-4.5 per cent GDP growth in H2 FY2023 belies conviction in a back-ended pickup in growth driven by government and private capex," she said.
V Swaminathan, CEO, Andromeda and Apnapaisa said:"Keeping the rates unchanged is a signal that growth is being prioritised over all else. It remains to be seen what happens over the next quarter.