NEW DELHI : Public-sector banks have sufficient liquidity and efforts are being made to ensure that due payments are released to micro, small and medium enterprises (MSME) sector by large corporates ahead of Diwali, finance minister Nirmala Sitharaman said.

Besides, if MSMEs want any term loans, this will be looked at in the second phase of the government’s outreach programme beginning next week.

The minister’s remarks come as Indian businesses, especially MSMEs, battle a demand slowdown and a liquidity crunch that have resulted in the economic growth rate falling to a six-year-low of 5% in the June quarter. Increased credit disbursal by banks is aimed at helping small businesses scale up operations and create jobs.

After a review meeting with heads of public-sector banks (PSBs) on Monday, Sitharaman told reporters that banks have been asked to provide bill discounting facility to MSMEs against payments due from large corporates.

According to returns filed by large corporates, as much as 40,000 crore is due to the MSME sectors, Sitharaman said.

“Big corporates have reported to the MCA (ministry of corporate affairs) in the regular returns that they owe 40,000 crore to the MSMEs. The banks agreed that since they suffer the most from shortage of cash during these camps, they will reach out to all these MSMEs to do the bill discounting," finance and banking secretary Rajiv Kumar said.

Sitharaman said the government will have a two pronged approach, in which, data in all disaggregated form is given to the banks and they shall make an attempt to approach every MSME and ask them if they want this bill discounting and report to the Sitharaman by 22 October. In addition, corporate affairs secretary Injeti Srinivas will write to all large companies to expedite payments to the MSMEs.

As much as 81,781 crore, including new term loans of 34,342 crore, was disbursed in the first phase of the outreach programme organized by state-run banks in over 200 districts during 1-9 October. The second outreach programme across 150 districts will start ahead of Diwali from 21 October and will continue over the next four days.

Since 19 September, the finance minister has met public as well as private sector banks, NBFCs, housing finance companies (HFCs) and microfinance institutions (MFIs) and prodded them to take steps to increase credit disbursal during the festive season, seeking to boost consumer demand amid a slowdown in the economy.

Continuing support towards the NBFC/HFCs, PSBs have sanctioned 3.97 trillion in the form of credit as well as pool-buyouts of 1.07 trillion, including 15,455 crore under the newly-launched partial credit guarantee scheme between September 2018 and 10 October, 2019.

The government would also issue suitable clarifications to banks with a view to expedite processing of proposals under the scheme, the finance ministry said, which may include allowing NBFCs with ‘investment rating’ but with good quality loans to be included in the scheme.

As part of the 1 trillion partial credit guarantee scheme, which was announced for restoring liquidity in NBFCs, the government is providing a one-time six-month partial credit guarantee to state-owned banks for the first loss of up to 10% for the purchase of high-rated assets.

As far as concerns pertaining to slowdown in the economy are concerned, Sitharaman said the government has not set up a turnaround time yet, but has been constantly meeting, hearing and responding to the industry and concerned stakeholders.

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