At a time when micro, small and medium enterprises (MSMEs) are facing stress amid a slowing economy, Reserve Bank of India deputy governor Viral Acharya said a more fundamental approach was required to address the issues of the sector rather than any regulatory forbearance.
In November, the government ‘advised’ the banking regulator to consider a debt restructuring scheme of standard loans of MSMEs, up to ₹25 crore. MSMEs were badly hit by the demonetisation exercise which rendered over 86% of the currency in circulation invalid. The government had been pushing for such a scheme for a long time. “At RBI, we are quite excited about how we can solve the credit problems at the grassroots for micro entrepreneurs in a fundamental way, rather than saying ‘when they default we will just give them forbearance’, and give them another six or nine months to pay up,” Mr. Acharya said while addressing IIT-Bombay’s annual Techfest.
The deputy governor reiterated setting up of a public credit registry (PCR), regulated by RBI.
The high-level task force on public credit registry for India constituted by the RBI had said that setting up of the PCR may be expedited. Given the broader scope of PCR, the project may be implemented in phases with maximum coverage to be achieved in the first phase.
“We’ve not yet fully engaged with the government to get such a legislation through because the Reserve Bank already has certain rights under the existing legislation,” Mr. Acharya said.
He added that work on the registry was happening in a modular manner and it could take three to five years before every financial transaction that is taking place in the credit economy was captured.
“We are starting with where the legislative rights are already there with RBI,” he said, adding that work would take place in parallel on all other aspects, including creating a legislative framework and taking care of technological changes.