Government announces relief for MSMEs and melas loans to boost liquidity

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Just before the start of the festive season, Finance Minister Nirmala Sitharaman announced on Thursday that banks have been asked not to classify struggling small and medium enterprises or MSMEs as non-performing assets (NPAs) until 2020.

The announcement comes at a time when the NBFC sector, considered the backbone of several sectors in the country, has been facing an acute loan crisis which began in 2018. However, the government’s decision just before the season celebrations could be reason for MSMEs to applaud.

While banks disbursed loans worth Rs 11.83 lakh crore to MSMEs in 2018-19, the numbers have declined in the current financial year.

Meanwhile, the government will also hold “loan melas” or loan camps in 200 districts between Oct. 3 and Oct. 7 to facilitate easy loans to those in attendance.

The most important effort here would be to encourage people, especially from rural areas, to take out loans. It should be noted that the government has focused heavily on increasing rural spending.

Owners of people and industries will be summoned to the public meeting to avail the credit. Another camp of this type will be organized after October 11. Minister of State for Finance Anurag Thakur will then identify the MPs from the districts and ask them if the people in the area have benefited from the exercise.

After Nirmala Sitharaman’s announcement to link bank loans to repo rates, PSOs introduced loan products linked to the repo rate for housing and vehicles, consumer credit, cash credit limits and mortgage loans.

Already, over 1.08 lakh repo-related proposals amounting to over Rs 40,000 crore have been sanctioned. The move came after the finance minister asked banks to pass on the benefits given by RBI to customers a few days ago.

Bearing in mind that many actual cases of default are charged as a result of recent fraud committed, the CVC (Central Vigilance Commission) has issued instructions to the Internal Advisory Committee (IAC)
in banks.

The Minister of Finance added that the government wants to help citizens before the holiday season.

She said several MSMEs want a one-time settlement of their outstanding loans and added that banks will now sit down with them and sort out the issues. Also from July 1 to September 30, banks will have to give details of the number of people who received a single settlement.

During the two-hour meeting with the heads of public sector banks, a discussion on helping farmers also took place. Measures concerning farmers will be taken soon.

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