FM Sitharaman announces big-bang package for MSMEs to revive economy

Rs 6-trn stimulus includes Rs 3 trn of collateral-free loans; Rs 30,000-crore special liquidity scheme for NBFCs, HFCs, MFIs

Union Finance Minister Nirmala Sitharaman on Wednesday announced a set of stimulus measures of nearly Rs 5.94 trillion to provide relief to various constituents of the Indian economy. They are micro, small, and medium enterprises (MSMEs); taxpayers; non-banking financial companies (NBFCs); power distribution companies; the real estate sector; organised sector employees; and contractors working with the government.

These measures are part of the Rs 20-trillion “Atmanirbhar Bharat” package, announced by Prime Minister Narendra Modi on Tuesday. The finance minister said she would make announcements pertaining to different sectors every day, starting Wednesday, as the government looks to kick-start economic activities even as the nationwide Covid-19 lockdown is expected to continue beyond May 17.

ALSO READ: Bigger reforms coming, we’ll see a V-shaped recovery: CEA Subramanian

The immediate fiscal impact of Wednesday’s announcements could be less than Rs 20,000 crore, even though analysts differ on that. The key measures were aimed at MSMEs, with a Rs 3-trillion credit guarantee fund for collateral-free automatic loans, a Rs 20,000-crore subordinate fund for stressed MSMEs, and a Rs 50,000-crore equity infusion “fund of funds”.

Banks to get two-year guarantee to purchase ‘pooled assets’ of NBFCs

The government has allowed the NBFCs and HFCs to buy back their assets ‘after a specified period of 12 months’ as a repurchase transaction, on a right of first refusal basis

The Union government on Tuesday announced a scheme for providing a one-time credit guarantee to public sector banks (PSBs) for purchase of pooled non-banking financial companies’ (NBFC) assets.

Under the scheme, notified on August 10, public sector banks (PSBs) have been given a deadline of six months to purchase “pooled assets” of NBFCs at fair value. “One-time guarantee provided by the government on the pooled assets will be valid for 24 months from the date of purchase and can be invoked on the occurrence of default,” according to the notification.

This follows a Union Budget announcement made by Finance Minister Nirmala Sitharaman that the government will provide a one-time partial credit guarantee to PSBs for first loss of up to 10 per cent for purchase of high-rate pooled assets of NBFCs totaling Rs 1 trillion.

The government has laid down “stringent” criteria for eligibility of NBFCs and housing finance companies (HFCs) to become a part of the scheme and offer their assets for sale to banks. The NBFCs or HFCs should have made a net profit in any of the last two financial years, that is 2017-18 and 2018-19, and their net-performing assets should not be more than 6 per cent till March 31, 2019, the scheme said…