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Budget 2021: How govt's emergency credit line benefitted MSME sector

Union Budget 2021 MSME sector expectations: As part of the Centre's ECLGS programme which is valid until March 21, 2021, the Centre has already sanctioned 71.3 per cent of the Rs 3 lakh crore emergency credit to the badly affected MSMEs and businesses as of January 8, 2021

twitter-logoBusinessToday.In | February 1, 2021 | Updated 11:03 IST
Budget 2021: How govt's emergency credit line benefitted MSME sector
Budget 2021 expectations: Under the scheme, Finance Minister Niramala Sitharaman had announced Rs 50,000 crore equity infusion, and the provision of Rs 20,000 crore as debt, and change in definition of MSMEs to provide benefit to a large number of enterprises

Budget 2021: MSMEs (medium, small and micro enterprises) are pinning high hopes from this year's budget, which is coming at a time when India is fighting hard against Covid-19. The sector, which was battered by Covid-induced lockdowns, was offered a lifeline in terms of an emergency credit line guarantee scheme (ECLGS) by the Centre. Under the scheme, Finance Minister Niramala Sitharaman had announced Rs 50,000 crore equity infusion, and the provision of Rs 20,000 crore as debt, and change in definition of MSMEs to provide benefit to a large number of enterprises.

As part of the Centre's ECLGS programme under the Atma Nirbhar Bharat Abhiyan package, which is valid until March 21, 2021, the Centre has already sanctioned 71.3 per cent of the Rs 3 lakh crore emergency credit to the badly affected MSMEs and businesses as of January 8, 2021. The scheme was launched in May 2020 after over a month of total lockdown across the country. After reviewing the situation in November, the scheme was extended till March 31, 2021.

The scheme offered MSMEs and small businesses loans up to 20 per cent of their entire credit outstanding as on February 29. Initially, the Centre put a cap that only companies with Rs 100 crore turnover and Rs 25 crore outstanding will be eligible but the turnover cap was removed in November 2020.

Experts say the crucial challenge before the Modi government in this year's budget is to encourage lending and allaying the fears of lenders concerned over rising NPAs. They say one way to do it is by formulating the existing credit guarantee scheme in line with the ECLGS. The credit guarantee scheme, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), provides collateral-free loans to MSMEs.

Other demands of the MSME sector are temporary suspension of Basel norms to allow more lending to the sector; reduction on GST in professional services from the current 18 per cent to 5 per cent; enhancement of collateral free loan limit to Rs 35 crore from the current Rs 15 crore for small businesses.

Also read: Budget 2021 Live Updates: Cabinet approves Budget; FM Sitharaman to speak in Parliament soon

Also read: Budget 2021: Date, speech time, sector-wise expectations; everything you need to know

Also read: Budget 2021 Highlights: Govt may impose Covid-19 cess on high-income earners

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