OPEN APP
Home / Opinion / Quick Edit /  Backstops for loans

Backstops for loans

Union Finance Minister Nirmala SitharamanPremium
Union Finance Minister Nirmala Sitharaman

Loan guarantees seem to be the government’s first resort in such an economic crunch, but these tools operate rather slowly. For an effective rescue, we’d need generous direct spending, with cash upfront. Monday’s 23,220 crore earmarked for public healthcare is a good sign

Nirmala Sitharaman, Indian economy, Emergency Credit Line Guarantee Scheme, loans for covid-affected sectors, healthcare, micro-finance lenders, credit programmes,

Finance minister Nirmala Sitharaman announced fresh measures to support our economy on Monday. As part of this package, the Centre’s backstop for loans to businesses under the earlier Emergency Credit Line Guarantee Scheme has been enhanced to cover 1.5 trillion in extra lending. A new guarantee for loans worth 1.1 trillion has also been declared for covid-affected sectors, with 50,000 crore of state-backed loans for healthcare. Credit facilities for households and a default cover for banks lending money to micro-finance lenders also form part of the hamper.

A relief plan was necessitated by the trail of devastation left by India’s second wave of covid. Although most supply chains did not snap this time, demand took a beating. The big question is whether credit programmes can give our economy a sufficient stimulus. Loan guarantees seem to be the government’s first resort in such an economic crunch, but these tools operate rather slowly, through banks and state-run agencies, and have limited impact on demand. For an effective rescue, we’d need generous direct spending, with cash upfront. Monday’s 23,220 crore earmarked for public healthcare is a good sign.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout