Economic stimulus: Collateral-free loans worth ₹3 lakh cr for MSMEs

Finance Minister Nirmala Sitharaman on Wednesday laid out the contours of the ₹20-trillion mega economic relief package announced by Prime Minister Narendra Modi on Tuesday.

She said Modi's "comprehensive vision" for the economy will spur the Indian economy.

"PM laid out a comprehensive vision, and that vision was laid out after wide consultations with several sections of the society," she said.

Sitharaman announced collateral-free loans worth ₹3 lakh crore for Micro, Small and Medium Enterprises. MSME units with ₹100 crore turnover or with an outstanding loan of ₹25 crore will stand to benefit. Tenor of these loans will be four years, valid upto 31 October, 2020 and moratorium of 12 months has been given. The government will provide 100% credit guarantee cover to banks and NBFCs on principal and interest.

The move is likely to benefit 45 lakh MSME units and can resume their business activities and safeguard jobs during the pandemic, said FM.

"Also, ₹20,000 crore subordinate debt will be provided for stressed MSMEs, two lakh MSMEs to benefit," said Sitharaman.

"Definition of MSMEs has been revised, investment limit to be revised upwards, additional criteria of turnover also being introduced," she further said.

FM also announced ₹50,000 cr equity infusion through MSME Fund of Funds, which will provide support to the growth of potential MSMEs.

She said Indian MSMEs and other companies have often faced unfair competition from foreign companies and hence global tenders upto ₹200 crore to be disallowed in government procurement.

"Global tenders to be disallowed in government procurement up to ₹200 crore. This will make self-reliant India, will also then be able to serve 'Make in India'," said Sitharaman.

Govt of India and Central Public Sector Enterprises will honour every MSME receivable in the next 45 days, assured FM.

"Five pillars of 'Atmanirbhar Bharat' are economy, infrastructure, system, demography and demand," the minister said.

The Prime Minister on Tuesday announced a massive new financial incentive on top of the previously announced packages for a combined stimulus of ₹20 lakh crore.

"Atmanirbhar (self-reliant) India does not mean India is to be an isolationist country," said the FM.

DBT, MNREGA schemes spruced to benefit farmers and workers during the pandemic, she said.

"Beginning today, over the next few days we will come before media with FinMin team to put forth PM's vision," Sitharaman said.

After Modi's speech to the nation on Tuesday, Sitharaman endorsed Modi's vision on Twitter.

"#AatmaNirbharBharat does not imply isolationism or becoming exclusionist. We’ll build capacities, skill people and compete globally acquiring strengths. We’ll build the #Local. After all, every global brand began with their #Local strength. We shall integrate with GVCs," she tweeted.

"@PMOIndia’s vision: #AatmanirbharBharat Abhiyan to include everyone-a hawker/street vendor, a trader, a MSME, an honest tax paying middle class,a manufacturer etc. This shall not be just a financial package, but a reform stimulus, a mindset overhaul, and a thrust in governance," Sitharaman said in another tweet to give a sense of what is to be announced on Wednesday.