New Delhi, Oct 29 (KNN) “There should be one time restructure of MSME loans upto Rs 400 crores by 2020 to give relief to MSMEs,” this is what Swadeshi Jagran Manch’s (SJM) S Gurumurthy proposed to the Reserve Bank of India (RBI), the reason which is seen as a root cause for the outburst of RBI’s deputy governor Viral Acharya.

Talking to KNN India, a Senior Official of SJM, said, “Gurumurthy had proposed that there should be one time restructure of MSME loans upto Rs 400 crores by 2020 to give relief to MSMEs.”

"There is a general agreement upto Rs 250 crores, even if its Rs 250 crore it is fair enough,” he added.

However, the official said that “If some suggestion has been made on easing pressure on MSMEs, I don’t understand why Viral Acharya has opposed as this is a very serious question that comes to everybody's mind.”

Sharing his official point of view he said 'policy making should be in the hands of those who understand the realities of this country.

Gurumurthy, the non-official director of RBI, has called the media report speculating him to be the reason behind outburst of RBI’s deputy governor Viral Acharya against the government as “completely wrong”.

Gurumurthy is a Chartered Accountant by profession and Convener of Swadeshi Jagaran Manch.

The Indian Express today reported that the RBI deputy governor Viral Acharya’s recent public outburst on the government's interference in the activities of the central bank reveals simmering tensions between the RBI and the centre.

Responding to this, Gurumurthy tweeted, “Completely wrong. Was present in the board. All directors would testify that out of 5 issues, on 4 there was agreement. On one not. No pressure at all.”

On this, Dr Ashwini Mahajan, Co-Convener of SJM tweeted,” If a proposal is made to ease pressure on MSME, why DyGov @RBI #ViralAcharya gets so uneasy?”

Media reports have been doing rounds that that the pressure on the central bank to ease credit to MSMEs and relax lending norms have been mounting.

As per the Indian Express report, Acharya's outburst was in response to Gurumurthy’s demand for ‘MSME forbearance and increased credit flow, particularly at a time when growth is seemingly slowing down.’

Though MSME forbearance would make it easier for banks to recognise loans to micro, small and medium enterprises as non-performing assets, the policy is highly contested, said the report.

The report stated that while many non- official directors are supporting Gurumurthy’s view, full-time directors and some non-official directors are of the view that these steps are against the RBI’s objective to create an environment of sustainable banking.

“Some other directors nominated by the government, including former cooperative banker Satish Marathe, former Indian Audit and Accounts Service officer Revathy Iyer and Director General, RIS, Sachin Chaturvedi, have also differed with RBI’s full-time directors on these issues,” it reported.

According to RBI’s report on sectoral deployment of credit till August-end this year, credit to industry has grown by just 1.9% year-on-year. The credit to micro and small enterprises has increased 2.6%, and to medium enterprises by 6.5%. In contrast. Meanwhile, credit to the services sector grew by 26.7%. The MSME segment accounts for just about 6% of the gross bank credit.

Meanwhile, Viral Acharya in the speech on Friday had warned that undermining a central bank's independence could be "potentially catastrophic".

Acharya said in a speech on Friday that more needed to be done to ensure effective independence for the central bank in its regulatory and supervisory powers.

"The risks of undermining the central bank's independence are potentially catastrophic," said Acharya, adding that rash moves could trigger a "crisis of confidence in capital markets that are tapped by governments and others in the economy."

Acharya, who had three of his fellow deputy governors in the audience, also thanked RBI Governor Urjit Patel for his "suggestion to explore this theme for a speech".

Referring to NBFCs, Acharya said that systemic risks can build in shadow banks when important parts of financial intermediation are kept outside the purview of the central bank. He warned this could come at "substantive costs to future generations in the form of unchecked financial fragility."

"Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution," he said.

Those "who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans," he added. (KNN Bureau)