The proposed economic package aimed at making the country self-reliant may include a provision for additional loans of up to Rs 3 lakh crore or 20% of the bank exposure to the sector, along with a more liberal dispensation for government contracts.
The Times of India citing government sources said the finance ministry has floated a proposal for the Union cabinet to guarantee fresh working capital limits to small units through the National Credit Guarantee Trustee Company so that small businesses are not starved of working capital.
At present, the banking sector total exposure to over six crore micro, small and medium enterprises (MSMEs) is estimated at around Rs 15 lakh crore, government sources told the publication.
Between March 20 and May 8, state-run lenders contacted 97% of borrowers eligible for emergency credit lines and working capital enhancements and sanctioned Rs 65,879 crore loans, the finance ministry said. However, this funding is likely to be inadequate even to pay salaries and other dues as sales have come to a halt, and payments are overdue from large businesses and government departments.
Additional working capital is expected to help banks lend more to provide funds to MSMEs amid expectations that the finance ministry will prod the RBI to extend the loan moratorium beyond the current three-month period so that businesses don’t come under pressure to repay dues at a time when liquidity is already tight in absence of sales, the publication mentioned.
Apart from helping them tide over the immediate cash crunch, an announcement on a new definition for MSME is also expected to enable them to scale up. Besides, there are indications that government contracts up to a specified value will be given to Indian businesses. Also, the mandatory procurement from micro and small businesses is expected to be tightly monitored.
(With inputs from timesnownews)