Mumbai:
The various initiatives announced by the government on Wednesday to support micro, small and medium enterprises (MSMEs) will encourage banks to lend more to the sector, bankers said.
Finance Minister Nirmala Sitharaman on Wednesday unveiled a series of initiatives for MSMEs, including Rs 3 lakh crore worth of collateral-free automatic loans for businesses, a subordinate debt of Rs 20,000 crore for stressed units, a Fund of Funds for equity infusion of Rs 50,000 crore, and revision in the definition of MSMEs.
The sector has been hit hard by the lockdown due to the coronavirus pandemic, with millions of units staring at the prospect of closure and the threat of job losses.
SBI chairman Rajnish Kumar said the policy bouquet unveiled by the government is well-structured, suitably targeted, within reasonable fiscal limits, but will still have the maximum impact.
“The measures for MSME through guarantees, equity infusion and debt support will incentivize bank lending to MSMEs as well as providing crucial support to stressed entities in the current situation,” Kumar said.
The proposed definitional change for MSME sector based on turnover is progressive and is perfectly synchronized with the GSTN framework, he said.
Bandhan Bank Managing Director and CEO C S Ghosh said the clear focus of the package on MSME is promising.
“The packages for standard, stressed and potential MSMEs will ensure that they have the resources to bounce back once the headwinds start tapering,” Ghosh said.
As part of the Rs 20 lakh crore financial package announced by Prime Minister Narendra Modi, Rs 3 lakh crore worth of collateral-free automatic loans will be sanctioned for businesses.
For this purpose, an emergency credit line to MSMEs has been introduced from banks and NBFCs up to 20 per cent of entire outstanding credit as on February 29, 2020, for borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover eligible.
Under this, loans will have a four-year tenor with a moratorium of 12 months on principal repayment.
A Rs 45,000 crore partial credit guarantee scheme 2.0 was also unveiled for non-banking financial companies (NBFC), housing finance companies (HFCs) and microfinance institutions (MFIs) with low credit rating to help them extend loans to individuals and MSMEs.
“The envisaged support of full credit guarantees to the lower rated NBFC and HFC entities will restore stability in financial markets and could act as a clear enabling factor for compressing credit spreads,” Kumar said.
According to Ghosh, the special liquidity scheme and partial credit guarantee scheme for NBFCs, HFCs and MFIs will ultimately benefit the end consumers, many of who are in the rural and semi-urban areas.
Lakshmi Vilas Bank’s treasury head R K Gurumurthy said the package,the first in various tranches, will go a long way in resuscitating a section of the small and medium manufacturers who have been devastatingly affected by COVID-19 pandemic.
Welcoming the steps, Finance Industry Development Council (FIDC) co-chairman Raman Aggarwal said the key message is the full recognition of the contribution being made by NBFCs in last mile credit delivery to MSMEs by allowing NBFCs to give loans which have a 100 per cent guarantee cover from the government.
Microfinance Institutions Network’s (MFIN) CEO Harsh Shrivastava said, “The twin measures of Rs 30,000 crore special liquidity scheme with full government guarantee and Rs 45,000 crore partial credit guarantee scheme 2.0 will not only help in providing liquidity support but also increase the confidence among the lenders to the 5.8 crore microfinance borrowers, and thus spur onward lending all across the country.
