FM announces Rs 3 trn collateral free automatic loans for small businesses

File photo of Finance Minister Nirmala Sitharaman | Photo: Dalip Kumar
India will provide Rs 3 trillion worth collateral-free loans to small businesses for four years, said Finance Minister Nirmala Sitharaman on Wednesday as she gave details of a Rs 20-trillion package to support an economy battered by a weeks-long lockdown to contain the coronavirus pandemic.

The loans will help benefit 4.5 million micro, small and medium enterprises (MSME) and will be available till October 31.

Hundred percent credit will be required and no principal repayment will be required for 12 months, said Sitharaman at a press conference in Delhi a day after Prime Minister Narendra Modi announced the package to “make India self-reliant” and ready to "own the twentieth century".

The definition of MSMEs is being changed to help businesses. Now a company can be MSME if the turnover is up to Rs 100 crore. Distinction between manufacturing and services MSMEs will be removed, she said.

Modi, in an address to the nation, said the package was equivalent to 10 per cent of India's gross domestic product, and was aimed at the multitudes out of work and the businesses reeling under the 49-day shutdown. "The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, medium and small enterprises, labourers, middle class, industries, among others," he said.

In March, the government said it was providing around Rs 1.7 trillion in direct cash transfers and food security measures, mainly for the poor, but was widely accused of doing too little.

Economists said the new package included the March allocation as well as liquidity measures announced by the Reserve Bank of India worth Rs 6.5 trillion, according to news agency Reuters.

Last week, the government increased its borrowing programme for the year to Rs 12 trillion from Rs 7.8 trillion to fund some of its expenses.

Even before the pandemic, India's growth was slowing and public finances were strained because of poor tax collection and higher spending. Ratings agency Fitch said last month India's sovereign rating could come under pressure if its fiscal outlook deteriorates further as the government tries to tackle the coronavirus crisis.

India had more than 70,000 coronavirus cases and over 2,000 deaths from the disease, as Modi said the lockdown would be extended beyond May 17 but with a new set of rules allowing businesses greater freedom to resume work.
Enable GingerCannot connect to Ginger Check your internet connection

or reload the browserDisable in this text fieldEditEdit in GingerEdit in Ginger×


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel