InvestorQ : Nirmala Sitharaman, the finance minister, was also expected to turn the focus on NBFCs, small scale undertakings and the auto sector. What is the status on that front?
Anu Biswas made post

Nirmala Sitharaman, the finance minister, was also expected to turn the focus on NBFCs, small scale undertakings and the auto sector. What is the status on that front?

Answer
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Neelam Naik answered.
1 year ago


The announcements made by the FM on Friday have some specific announcements for the NBFCs and the financial sector. NBFCs and SMEs were at the centre of the liquidity crunch in India in the last one year even as the problem of MSMEs has been going on since demonetization. The infusion of Rs.70,000 crore into PSBs will be done on a priority basis. The FM has assured greater repo rate linked pricing of loans to ensure quicker transmission of rate cuts. In an important turn of events, the NBFCs will also be allowed to use the Aadhar based method of client addition. This will enable these NBFCs to rapidly expand their client base in a cost effective way. For the MSMEs (Micro, small and medium enterprises) the FM has offered a one-time settlement policy without impairing their future borrowing capacity. To give a boost to the beleaguered housing finance sector, the FM has also announced additional support of Rs.30,000 crore for the housing finance sector.

To begin with, there was some disappointment for the auto sector because the expected cut in GST rates from 28% to 18% did not materialize. In a way, the auto sector (be it automobiles or auto ancillaries), represented the slowdown in consumption. As a start, the FM has deferred the hike in one-time registration to 2020. For the last few years, the government has had a policy wherein none of its departments were buying new cars. In a surprising departure, government has given up its no-new-car purchase policy for government departments so as to boost demand for cars. The FM also enhanced the depreciation on auto inventory from 15% to 30% till 2020 to make inventory build-up more viable. Apart from these measures, lower rates should also boost demand. While a start has surely been made, the auto sector will be disappointed that the GST cut was not implemented. That would have provided the real relief.