RBI Policy: MSME To Have Dual Headwinds, Rising Inflation & Rising Interest Costs: Analyst

RBI, the central bank of India hiked the repo rate by 50 bps for the 4th straight session, impacting the bank-loans segment significantly, As the RBI raises the repo rate, the banks might again hike the interest rates on loans, which will eventually impact the micro-economic sectors in the country. MSMEs are already struggling with inflation, lower demand, and loan interests. The recent rate hike will again pressurize them.

Commenting on the matter regarding MSME, Mr. Manish Lunia, Co-Founder of Flexiloans.com stated, "The RBI continues to measure growth and inflation parameters very closely and that should help retain medium-term stability. With over 190 bps increase over the last 6 months, the same will get passed to the end MSME that will have dual headwinds of rising inflation and rising interest costs. Our current market checks indicate that the economic buoyancy is high in the current festive season and demand for Credit remains high. The RBI Repo rate increase of 50 bps was imminent and in line with the macroeconomic factors and currency depreciation already bothering the country."

SBI Ecowrap report authored by the SBI's Group Chief Economic Adviser Soumya Kanti Ghosh stated that the repo rate hikes by the Reserve Bank of India (RBI) since May this year are expected to increase the interest cost on MSME and personal loans by around Rs. 1,957 per Rs. 1 lakh loan in a year. Additionally, the demand of around Rs. 50,000 crore may plunge. Hence, the MSMEs may face further struggles.