World Bank clears $750mn aid for MSMES
MUMBAI: Loans outstanding to micro, small and medium enterprise (MSME) sector fell by ₹34,627 crore during the nationwide lockdown despite the government pushing banks to provide loans on easier terms to small businesses affected by the pandemic.
The latest disaggregated credit data released by the Reserve Bank of India (RBI) showed that loans to small businesses in the industries segment fell 7.1% to ₹4.52 lakh crore as of May 22 from ₹4.87 lakh crore as on March 27.
Since banks started working on the government’s guaranteed credit scheme from June 1, data on those disbursals are not reflected by RBI.
Data showed that even after banks began their own Covid-19 emergency credit lines after the lockdown was eased, it did not alter their existing risk-aversion towards small businesses.
Madan Sabnavis, chief economist at Care Ratings, said the decline reinforces the view that despite starting their own emergency credit line schemes, banks had not opened their purse strings for MSMES. Lenders have sanctioned ₹1.01 lakh crore in guaranteed loans to small businesses.
NEW DELHI: The World Bank on Wednesday approved a $750million programme for micro, small and medium enterprises (MSME), a key economic sector crippled by Covid-19.
Given uncertainties related to Covid-19, lenders remain wary about MSME borrowers’ ability to repay. This resulted in a serious cash-flow problem to even viable enterprises in the sector, the bank said on Wednesday.
“The MSME Emergency Response programme will address the immediate liquidity and credit needs of some 1.5 million viable MSMES to help them withstand the impact of the current shock and protect millions of jobs,” the bank said.
The World Bank’s MSME programme will support the government’s initiatives by “de-risking” lending from banks and non-banking financial companies to MSMES through a range of instruments, including credit guarantees.
“The immediate need is to ensure that the liquidity infused into the system by the government is accessed by MSMES. Equally important is to strengthen the overall financing ecosystem for MSMES,” said Junaid Ahmad, World Bank Country Director in India.
The MSME sector, the backbone of Indian manufacturing, account for 29% of the country’s gross domestic product (GDP), the widest measure of a country’s income growth, according to official data. Small enterprises also account for 40% of India’s exports and employ over 150 million people.
The sector has been hit by a sharp fall in revenues due to lack of cash, cancelled orders and supply-chain disruptions from Covid-19.
THE PROGRAMME WILL ADDRESS THE CURRENT LIQUIDITY AND CREDIT NEEDS OF SOME 1.5 MN VIABLE MSMES