Repo rate hike to force MSMEs utilise capital in right way

New Delhi, June 10 (KNN) Micro, small and medium enterprises (MSMEs) will be required to utilise their capital in the right way due to the raise in repo rate announced by the Reserve Bank of India (RBI), said a Gurugram based TReDS platform. 

The central bank increased the repo rate by 50 basis points to 4.90 per cent on June 8.

Underling the impact of inflation and RBI’s monetary policy on MSME, Sundeep Mohindru, MD & CEO of M1xchange said that, “With the hike in repo rate, MSMEs will have to utilize their capital in the right way.” 

He said that many MSMEs will opt for alternative trade finance through trade receivables discounting systems, which will not create much burden on them due to shorter duration and capital will be utilized instantly for their growth.

Commenting on the economy, Mohindru said that India's economy grew quicker than predicted, and their subsequent acquisitions encouraged the expansion of lending to MSMEs. 

In February 2022, it contributed to the expansion of loans to micro, small, and medium-sized businesses. 

The majority expected it would be hiked, and inflation also would be high as a result of the war in Ukraine and worldwide environmental challenges, with highly expected commodity costs as a result, he added.  (KNN Bureau)