The government is said to be considering a proposal to guarantee Rs 3 lakh crore ($39 billion) of loans to small businesses in an attempt to restart the economy that has been hit by the lockdown imposed due to the Coronavirus pandemic, reports Economic Times.
The proposal aims to make small firms eligible to borrow an additional 20 per cent of their credit limit which will be guaranteed by the government through a special fund set up to pay for any defaults.
The move gains much significance as it comes at a time when the Indian economy is set to contract for the first time in several decades in the light of an unprecedented nationwide lockdown which has adversely impacted the businesses across the sectors.
The Government's move to guarantee the additional bank loans to small businesses is expected to make it viable and attractive for the banking institutions to lend to them without apprehensions of a surge in non-performing assets.
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