Year Ender 2018: RBI Takes a Step Towards Economic Stability

There are many steps RBI takes to improve the economic structures of the country.

Recently it has taken a step to keep a check on the economic stability.

If you are appearing for any competitive exam, you should know about the latest updates.

Know about MSME

Reserve Bank of India (RBI) announced the formation of a committee of experts to identify the reasons to offer long-term solutions and for the economic and financial stability of the Micro, Small and Medium Enterprises (MSME) sector on December 05, 2018.

In addition, the RBI said that from the next financial year, a new external benchmark will be created for the floating interest rates by banks for MSME.

It is a step towards strengthening the area's regulation and supervision.

Main Points

1. A committee of experts will be constituted to identify reasons for economic and financial stability of the MSME sector and also to offer long term solutions for the problems.
 

2. The committee will consider the banks placed in the Quick Action category.
 

3. Of the 21 public sector banks, 11 are in this category.
 

4. RBI can relax the rules for them.
 

5. Based on the recommendations of another committee of experts, the RBI has announced that the existing prime lending rate (PLR), benchmark prime lending rate (BPLR), base rate and marginal cost of fund based lending rate (MCLR)

Now in exchange for the benchmark, you will use the external benchmark for your floating rate loan.
 

6. The committee of experts will be constituted by the end of this month, while the committee will submit its report by June 2019.

Why is it Required?

Due to mainly informal nature, MSME has been prone to structural and cyclical shocks and has continued to have constant effects.

Therefore it is important to understand the economic strengths and transfer costs affecting MSME performance.

In this direction, it has been proposed that new floating rate for personal or retail loans (loans for housing, auto etc.) and for floating rate loans for micro and small enterprises from April 1, 2019, a benchmark will be used.