Union Finance Minister Nirmala Sitharaman, during her media briefing on Wednesday, announced Rs 20,000 crore sub-ordinate debts for stressed MSMEs, which will likely benefit around 2 lakh micro, small and medium industries. The FM said that functioning MSMEs that are non-performing assets or stressed will also be eligible for such loans. She added that the government will provide a support of Rs 4,000 crore to CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises), which will provide partial credit guarantee support to banks.
The FM also announced the MSME promoters will be given debt by banks, which they could then infuse in their business as equity.
Besides, the FM also announced Rs 3 lakh crore worth collateral-free automatic loans for businesses, including MSMEs. "Business and MSMEs have been badly hit by the COVID-19 pandemic and they need additional funding to meet operational liabilities, buy raw material and restart businesses," the FM said. Subordinate debt are unsecured loans or known as junior securities. In case of default, creditors who own such debts are not paid till senior debtors are paid in full.
The FM also announced emergency credit line to businesses/MSMEs from bank and NBFCs up to 20 per cent of entire outstanding credit as on February 29. Those with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible for the credit line.
Such loans will have four-year tenor with moratorium of 12 months on principal amount, and interest on such loans will be capped. The government will also ensure 100 per cent credit guarantee cover for banks and NBFCs on principal and interest.
The FM said such schemes, which will require no guarantee fee or fresh collateral, can be availed by October 31. The FM said these initiatives will help resume business activity and safeguard jobs. The FM also announced Rs 50,000 crore equity infusion, which will be operated through a mother fund and few daughter funds.