`3L cr collateral-free loans boost for 45 lakh MSMES OUR CORRESPONDENT
NEW DELHI: Union Finance minister Nirmala Sitharaman on Wednesday announced a slew of measures to help businesses, including Micro, Small and Medium Enterprises (MSMES), recover from the economic impact of the Coronavirus pandemic. This was a part of the Rs 20 lakh crore stimulus package announced by Prime Minister Narendra Modi a day before to spur growth and help build a self-reliant India.
The government on Wednesday announced Rs 6 lakh crore package comprising Rs 3 lakh crore of collateral-free loans for small businesses and a Rs 30,000 crore
lifeline to non-bank and housing finance companies.
Also, it cut the tax rate on non-salary payments by 25 per cent, extended support to companies to meet statutory liability on employees’ retirement fund, provided a Rs 90,000 crore bailout to cash-starved electricity distribution companies and gave construction firms up to six more months to complete the government projects.
“It addresses ease of doing business, compliance and due diligence and the intention is also to build local brands,” Sitharaman said.
The Rs 20 lakh crore spending, including ones previously announced and the Reserve Bank measures, is seen as the government’s attempt to check the world’s fifth-largest economy hurtling towards its first full-year contraction in four decades.
Sitharaman said automatic collateral-free
loans of a four-year tenure with a 12-month moratorium on interest payment, will benefit 45 lakh small businesses.
Another two lakh such businesses would benefit from a Rs 20,000 crore subordinate debt for stressed or loan defaulting MSMES, she said, adding a fund of funds for MSMES is also being created, which will infuse Rs 50,000 crore equity in units that have growth potential.
Also, the definition of MSMES has been changed from a pure investment-based one to that provides for higher investments and turnover for companies to remain as small businesses, and avail financial and other incentives.
Besides, an estimated Rs 1 lakh crore in dues to MSMES by government and central PSUS will be released within 45 days.
Small and mid-sized businesses in India account for about a third of Gross Domestic Product and employ more than 11 crore people and the package announced on Wednesday is aimed at helping them overcome Coronavirus disruptions.
The Union Finance minister announced a Rs 30,000 crore special liquidity scheme for non-banking finance companies, housing finance companies and micro-finance institutions that are finding it difficult to raise money in debt markets.
Further a Rs 45,000 crore partial credit guarantee scheme 2.0 was also announced
for NBFCS, HFCS, and MFIS with low credit rating to help them extend a loan to individuals and MSMES.
In a relief to contractors, she announced up to six months (without costs to contractor) to be provided by all central agencies like Railways, Road Transport ministry and Central Public Works department to finish
construction works, and goods and services contracts.
For electricity distribution companies, she said state-owned Power Finance Corp (PFC) and Rural Electrification Corp (REC) will infuse Rs 90,000 crore liquidity against receivables, subject to discoms undertaking reforms such as digital payments.
Most economic activity in the country had come to a standstill after the government imposed a 21-day nationwide lockdown beginning March 25 to check the spread of Coronavirus. The lockdown has since been extended twice through May 17, with some relaxations to allow the resumption of economic activity.