The Reserve Bank of India (RBI) might have the last laugh in its spat with the government as the expert committee on Micro, Small and Medium Enterprise (MSME) credit is unlikely to submit its recommendations before the upcoming General Elections.
“An expert committee would be constituted by the RBI to identify causes and propose long-term solutions for the economic and financial sustainability of the MSME sector.
The composition of the committee and its terms of reference will be finalised by the end of December 2018. And the report would be available by end of June 2019,” said Mahesh Kumar Jain, RBI Deputy Governor, at a press conference after the Monetary Policy Committee meeting.
The General Elections in the country will take place before May 2019.
Earlier Congress President Rahul tweeted RBI not to bow to the pressure of Centre Government
After a public spat between the apex bank and the government over issues of credit to MSMEs and allocation of the RBI reserve, the board of the central bank on November 19 decided to refer both the issues to the expert committee.
The government has been unhappy with the Reserve Bank for not doing enough to enhance credit supply to MSMEs, which it considers a crucial vote bank for the general elections of 2019. The government has been also eyeing Rs 3.6 lakh crore from the RBI reserves as a way to dole out populistic schemes in a buildup to the elections.
However, Jain listed out the measures that the central bank had taken in order to improve credit supply to the MSME sector.
“The Reserve Bank has recently taken several steps such as setting up of trade receivables discounting system, the operationalisation of national mission for capacity building for bankers for financing MSME sector, allowing banks to give joint loans with NBFCs in order to facilitate the flow of the credit to the sector,” he said.
At the meeting chaired by RBI Governor Urjit Patel, the deputy governor also made a veiled attack on the demonetisation drive by Prime Minister Narendra Modi and implementation of the Goods and Services Tax.
“In order to enable MSMEs to tide over the impact of demonetisation and GST, the Reserve Bank also overtook regulatory forbearance in prudential norms. However, the increasing stress in the sector is a matter of concern,” he said.
The spat between the RBI and the government became public after one of its deputy governors Viral Acharya criticised the government for interference with the autonomy of the central bank.