Banks cannot refuse credit to MSME under emergency credit facility: Finance Minister Nirmala Sitharaman
Union Minister, Nitin Gadkari in May had highlighted the plight of the MSME sector and how it was on the verge of collapse and urged major industries to release the outstanding dues to such companies within a month
Keeping in mind the potential of micro, small and medium enterprises (MSME) in these turbulent times, Finance Minister Nirmala Sitharaman said banks cannot refuse credit to MSMEs under the emergency credit facility. “If refused, such instances must be reported,” she said. “I will look into it.”
The total amount sanctioned under the 100% Emergency Credit Line Guarantee Scheme by public sector banks and private banks, as of July 23 2020, stands at Rs 1,30,491.79 crore; of this Rs. 82,065.01 crore has already been disbursed.
Nirmala Sitharaman said the Finance Ministry is working with the Reserve Bank of India (RBI) on the extension of loan moratorium (restructuring scheme) for the hospitality industry. “I fully understand the requirements of the hospitality sector on the extension of the moratorium or restructuring. We are working with RBI on this,” she said. “The focus is on restructuring. Finance Ministry is actively engaged with RBI on this. In principle, the idea that there may be a restructuring required is well taken.”
The Finance Minister said the steps being announced and taken to deal with the current situation is being done after exhaustive consultation with the stakeholders and industry experts.
The motive is to help borrowers with liquidity crunch due to the COVID-19 pandemic. The central bank had announced a three-month loan moratorium in March, which was further extended, keeping in mind the prevailing situation, till August 31. Union Minister, Nitin Gadkari in May had brought the plight of MSMEs to the fore. He had said the MSME sector is on the verge of collapse and urged major industries to release the outstanding dues to such companies within a month.
Moreover, MSME is one of the sectors hit the hardest by the pandemic. Lack of size, infrastructure and ease of doing business, inadequate access to finance, high financing costs and inflexible labour laws have always restricted MSMEs. Furthermore, Chinese imports lately resulted in additional pressure, while entrepreneurs compounded the problem by not paying their fair share of taxes and investing for scale and technology.
Experts have pointed out that the government is constrained due to commitment to fiscal prudence. It must prioritise resource allocation among the needy sectors.
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