Finance Minister Nirmala Sitharaman on Wednesday announced a series of liquidity measures for millions of small businesses reeling under the impact of COVID-19 lockdown, including collateral-free automatic loans worth Rs 3 lakh crore.
Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible. These loans will have a four-year tenure and have a moratorium for 12 months on principal payment.
There will be a 100 per cent credit guarantee cover to banks and non-banking finance companies on principal and interest. The scheme can be availed till October 31.
“This will enable 45 lakh micro, small and medium enterprise (MSME) units to resume business activity and also safeguard jobs,” said Sitharaman. “The government will provide stressed MSMEs with equity support. We will facilitate the provision of Rs 20,000 crore as subordinate debt.”
For the subordinate debt for stressed MSMEs, promoters of MSMEs will be given debt by banks, which will then be infused by the promoter as equity in the unit. The subordinated debt facility will help two lakh stressed MSMEs.
“A fund of funds being created for infusing about Rs 50,000 crore as equity into MSMEs. This will benefit those MSMEs who have the potential and are viable. The corpus of the fund will be Rs 10,000 crore,” said the Finance Minister.
Sitharaman said that there will also be a change in the definition of MSMEs so that they can grow in size and get benefits. The investment limit which defined MSMEs has been revised upwards.
“Additional criteria being brought in is turnover size. The earlier differentiation between manufacturing and service MSMEs will be categorised similarly,” said Sitharaman.
To help MSMEs further, global tenders will be banned for government procurement up to Rs 200 crore. “Indian MSMEs often faced unfair competition from foreign companies. This will be a step towards self-reliant India and support Make in India,” she said.
Another measure the government has taken will deal with e-market linkage across the board for MSMEs.
“Post-COVID, trade fairs and exhibitions will be difficult so e-market linkage will be provided for MSMEs so that they will be able to find their market. Also, the government and central public sector enterprises will honour every MSME receivables in the next 45 days,” Sitharaman said.
During his address to the nation on Tuesday, Prime Minister Narendra Modi had announced a stimulus package totalling Rs 20 lakh crore to rescue the economy reeling under the impact of coronavirus. This amounts to nearly 10 per cent of India’s GDP.
Major Announcements Finance Minister:
- 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
- Collateral free automatic loans to MSMEs worth Rs3 Lakh Crore. These have 4 year tenor, valid up to October 31st, 2020. This will enable 45 lakh MSME units to resume business activity and also safeguard jobs
- Government to provide stressed MSMEs with equity support; Government will facilitate the provision of Rs. 20,000 Crores as subordinate debt
- Rs 50,000 cr. equity infusion for MSMEs through Fund of Funds; to be operated through a Mother Fund and few daughter funds; this will help to expand MSME size as well as capacity
- Definition of MSMEs has been revised, investment limit to be revised upwards, additional criteria of turnover also being introduced
- Global tenders to be disallowed in Government procurement up to Rs 200 crores. This will make self-reliant India, will also then be able to serve ‘Make in India’
- Govt of India and Central Public Sector Enterprises will honour every MSME receivable in the next 45 days
- To ease financial stress as businesses get back to work, Government decides to continue EPF support for business & workers for 3 more months providing a liquidity relief of Rs 2,500 crores
- In order to provide more take home salary for employees and to give relief to employers in payment of PF, EPF contribution is being reduced for businesses & workers for 3 months, amounting to liquidity support of Rs 6750 crores
- Government launches a Rs 30,000 crore Special Liquidity Scheme for non-banking financial companies, microfinance companies, housing finance companies: FM Sitharaman
- The government announces Rs 45,000 crore liquidity infusion through a Partial Credit Guarantee Scheme 2.0 for NBFCs
- RS 90,000 crore liquidity injection for Power Distribution Companies (DISCOMs)
- In a major relief to contractors, all Central agencies to provide an extension of up to 6 months, without cost to contractor, to obligations like completion of work covering construction and goods and services contracts
- Ministry of Housing to advise States/UTs &their Regulatory Authorities to extend registration&completion date suo-moto by 6mnts for all registered projects expiring on or after 25Mar,2020 without individual applications.Treat COVID-19 as an event of ‘Force Majeure’ under RERA
- TDS/TCS rates to be reduced by 25% till March 31, 2021
- Due date for Income Tax returns for the year 2019-2020 now being extended from 31st July and 31 Oct to 30 November 2020