Rs 3 Lakh Crore Allotted For Collateral-Free Loans To MSMEs, Stressed Units To Get Rs 20,000 Crore Liquidity

by Mehul Malpani - May 13, 2020 05:15 PM +05:30 IST
Rs 3 Lakh Crore Allotted For Collateral-Free Loans To MSMEs, Stressed Units To Get Rs 20,000 Crore LiquidityPrime Minister Narendra Modi with Finance Minister Nirmala Sitharaman.

Union Finance Minister (FM) Nirmala Sitharaman on Wednesday (13 May) presented the detailed breakup of the economic stimulus package that was announced by Prime Minister (PM) Narendra Modi last night.

The FM announced Rs 3 lakh crores for collateral-free automatic loans for small and medium scale business including MSMEs. The initiative would benefit about 45 lakh MSME units across the country, she said.

While acknowledging that businesses had been severely hit due to the COVID-19 pandemic, she said, “In a major initiative, we announce Rs 3 lakh crores collateral-free automatic loans for businesses, including SMEs. Borrowers with up Rs 25Cr outstanding and Rs100 Cr turnover are eligible.”

Under the initiative, the loans will have four year tenors with moratorium of 12 months on Principal repayment, and could be availed until 31 October, 2020, said the FM.

The borrowers will not have to give any guarantee fee for the loan, she added.

“This will enable 45 lakh MSME units to resume business activity and also safeguard jobs,” FM Sitharaman said.

For stressed MSMEs, the Finance Minister said, the government will allot Rs 20,000 crore liquidity through a subordinate debt-based scheme. The centre will provide Rs 4,000 crore to CGTMSE for this, she said.

The FM informed that about 2 lakh MSMEs will get benefitted under this initiative, while also saying that functioning MSMEs which are non-performing assets (NPAs) or are stressed will be eligible too.

The Finance Minister also announced Rs 50,000 crore equity into MSMEs for those who are viable and eligible to their expand capacity.

A fund of funds with the corpus of Rs 10,000 crores will be setup for this, which will operate through a mother fund and a few daughter funds, Sitharaman said, while adding “this will help to expand MSME size as well as capacity”.

Before getting to the package, she reiterated PM Modi’s call for Atmanirbhar Bharat (Self-reliant India) mentioning the five pillars of the campaign -- economy, infrastructure, system, demography and demand.

Sitharaman informed that this campaign was formulated after high-level extensive discussions to spur growth and create a self-reliant India.

The intention of the vision is to build local brands and scale them up on a global level, said the Finance Minister. She also clarified that self-reliance does not mean India becomes an isolationist nation.

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