Due to COVID-19, the economy has come almost to a halt. It has put most of the Units out of business and threaten their survival. The Sector is a critical part of the societal & economic framework of the nation. It was always a crucial part of the economy. The COVID-19 has undoubtedly created a lot of opportunities for this Sector, specially the Government’s thrust upon “Atam Nirbhar Bharat Abhiyan”. The Covid-19 has impacted not only the demand & supply for this Sector, but is facing severe liquidating crunch. The business is need to restart & the Government intends to support the Sector through various means.

The Government is making efforts for the return & safety of migrant labourers, wishing to get back to work, increase on import duties on Chinese products & also easing out the financials of the same, despite the fact that the patients are increasing day by day with the increase of percentage of recovery of patients. The efforts have been made by the Government to support the small businesses and help them recover.

The Government has promulgated the following:

3 lakh Crore Emergency Working Capital Facility for Businesses, including MSMEs

To provide relief to the business, additional working capital finance of 20{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with upto `25 Crore outstanding and turnover of up to 100 Crores whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} guaranteed by the Government of India providing a total liquidity of `3.0 lakh Crores to more than 45 lakh MSMEs.

20,000 Crores Subordinate Debt for Stressed MSMEs

Provision made for `20,000 Crores subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with `4,000 crore to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of his existing stake in the unit subject to a maximum of 75 lakh.

50,000 Crores equity infusion through MSME Fund of Funds

Govt. will set up a Fund of Funds with a corpus of 10,000 Crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilize equity of about 50,000 Crores.

The ministry has also asked the government and public sector units at the state and central levels to clear dues to MSMEs in 45 days. The industries in the private sector have been approached to support MSMEs by clearing their dues also. About `40,000 crore had been cleared for MSMEs through the government’s Samadhaan portal. It is to be noted that the Indian market is strong, supported by hard-working manpower, raw material is available, and it is present in global markets across sectors. It has good connection with foreign investors who are looking at Indian companies to take advantage of the easier processes that the government was tending towards, and increase India’s exports. However, the public sector as well as private sector has not geared up.

In the Government’s efforts to support this Sector, there is no such restriction imposed while announcing a package for MSME Sector. However, the Banks on its own have not improved its system, but has imposed unnecessary conditions either sanction or disbursing the financial assistance to this Sector.

As per Government’s promulgation that additional working capital finance of 20{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of the outstanding credit as on 29.02.2020 is to be provided to the MSME Sector besides other economic package of 70,000 Crores without any condition. The public and private sector banks are putting its own conditions while sanctioning & disbursing the credit facilities as promulgated by the Finance Minister.

Most of the Banks have obtained list from their Head offices, which are entitled for the verbalized finance. The Units, who had not achieved the turnover as per their projections have gainsaid the assistance. In some of the cases, the Banks have on its own are providing adscititious working capital finance of only 10{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of the outstanding credit as on 29.02.2020. In some of the cases, where the Units could not pay one or two months interest were withal gainsaid this supplemental working capital facility. Thereby the main thrust of the Government to revive this MSME Sector had been gainsaid by the soi-disant policies of its own against which a voice has to be raised and the Banks who had drawn its own policies against the Government’s thrust for renaissance of the Sector has to be taken aback.

The Government has redefined the MSME and increased the threshold limit of the investment, but has included the turn over criteria for this Sector. Now the MSME Sector has been defined as under:

  • a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
  • a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
  • a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

No doubt, the large Firms cannot survive without the support from MSME Units. It is otherwise a reciprocal relationship. The large Firms output sometimes get upset, once there is delay in delivery of any of the item from any of MSME Sector. There is inter dependence. However, in many of the cases, MSMEs do not have benefactors and left in the tray of survivals. Though due to cancellation of large number of contracts by the State or Centre Government for big Projects, there is a scope for big Indian Companies benefitting MSME Sector too for making the “Atam Nirbahr Bharat Abhiyan” success.

The Banks have to come forward for making the Scheme of the Government easy & avoiding putting in unnecessary conditions as discussed above for sanctioning & disbursing the loans despite the fact that the loans are granted by Central Government. As per data tweeted by the Finance Minister Nirmala Sitharaman on 04.07.2020 “the total amount sanctioned under the 100{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} Emergency Credit Line Guarantee Scheme (ECLGS) by the Public Sector Banks and Private Sector Banks stands at `1,14,502.58 Crore, of which `56,091.18 Crore has already been disbursed. She said that under ECLGS, the loan amounts sanctioned by the Public Sector Banks is increased to `65,863.63, of which `35,575.48 Crore has been disbursed as of July, 4. At the same time, Private Sector Banks have sanctioned `48,638.96 crore and disbursed `20,515.70 Crore.”

The present indicator of low disbursal by the Public Sector Banks and the Private Sector Banks not coming forward to concede the request of the Industry urging for financial assistance is its high headedness. This is despite the fact that it is 100{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} Guaranteed loan by the Central Government.

As there is large scope for the MSME Sector, which can reduce the reliance on raw material imports, therefore, the financial institution including the public sector and private sector lenders must relax their norms, if put in till date to help this Sector to achieve the Government goals, help the economy and the nation.

The present Scheme of the Government to give 20{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of the amount outstanding as on 29.02.2020 without any pre condition be allowed to the Borrowers, which would result in meeting the urgent financial needs of MSME Sector, and more takers for the loan surviving this Sector resulting in ultimately meeting the demand of the products for the nation.  The Government also must come heavily on the Banks not adhering to its Scheme, as announced to help the Sector recover.

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