Complete credit guarantee scheme:
The Rs 3-trillion infusion under this includes collateral-free loans and subordinate debt. This will provide much-needed liquidity by providing an additional 20 per cent support to all existing accounts, subject to conditions. CRISIL’s analysis of 13,000 companies over a five-year period indicates that the MSMEs’ working capital cycle can stretch by 15-20 per cent during downturns.
Subordinate debt of Rs 20,000 crore for stressed MSMEs:
This includes a Rs 4,000-crore support to the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) — the highest infusion in the last two decades — and amounts to Rs 60 per cent of the CGTMSE’s cumulative corpus since inception. However, asset quality risk is the key monitorable. For instance, the Pradhan Mantri Mudra
Yojana, which accounted for 14-15 per cent of MSME lending
in fiscal 2018-19, has seen a rise in gross non-performing assets in recent years.
: Using the new MSME definition, CRISIL
Research has analysed 12,000 companies (excluding traders) in its proprietary Quantix database. Their rated debt accounts for about 12 per cent of MSME debt outstanding. Considering the six-month interest moratorium and deferral on existing term and working capital loans, respectively, and the 12-month moratorium on fresh loans, the interest burden for 2020-21 will reduce by 25-30 per cent year-on-year. This will result in an estimated interest coverage ratio of 0.4 for the fiscal year, worse than last fiscal year’s 0.6, due to the severe impact on demand.
Note: Of the Rs 3.5-trillion infusion in MSMES, Rs 3 trillion is the complete credit guarantee scheme and the remaining Rs 50,000 crore comprises equity infusion through a fund of funds.