In what could give a leg-up to the financing of small and medium businesses and start-ups, the government on Wednesday vowed to give guarantees for loans up to Rs 1 lakh crore to be availed by them under the aegis of the newly set-up Micro Units Development Refinance Agency (Mudra). It also approved a new financing scheme — Stand Up India — under which an estimated 2.5 lakh SC/ST and women entrepreneurs could get bank loans of R10 lakh to R1 crore for greenfield enterprises in the non-farm sector in three years.
“The credit guarantee fund should definitely lead to increase in disbursements to SMEs and improved credit availability. This is a great step to boost growth of micro and small businesses,” said Sanjay Aggarwal, partner and head of enterprise practice, KPMG in India.
The approvals for these schemes by the Cabinet would also give an impetus to private investment, which is languishing, forcing the government to even contemplate to recalibrate its short-term fiscal strategy to augment public investment.
Since the launch of the Mudra scheme in April 2015, about 1.73 crore people/units have got loans, finance minister Arun Jaitley said after a Cabinet meeting. Any citizen who has a business plan for non-farm sector income-generating activity whose credit need is less than R10 lakh can approach either a bank, microfinance institution or non-banking financial company for availing of Mudra loans, he said. Banks and other financial intermediaries have been given a target of R1.22 lakh crore loan disbursement in 2015-16. They had disbursed R45,948 crore as on November 25, 2015. The Mudra credit guarantee fund will have an initial corpus of R3,000 crore.
The Cabinet also approved the conversion of Mudra into Mudra Small Industries Development Bank of India (Sidbi) Bank as a wholly owned subsidiary of Sidbi. It has a refinance corpus of R20,000 crore. As a precursor to the launch of the Pradhan Mantri Mudra Yojana on April 8, 2015, Mudra was set up as a corporate subsidiary of Sidbi in March 2015.
In another key decision, the Cabinet approved a hybrid annuity-based public-private partnership model under the Namami Gange programme to reform waste waters and develop a market for such waters. In this model, capital investment up to 40% will be made by the government through construction-linked milestones and the balance through annuity over the 20-year contract periods.
The government will also establish a special purpose vehicle to plan, structure, procure concessionaires, and monitor implementation of such PPP projects and develop a market for treated waste water through appropriate policy advocacy under the overall guidance of the National Mission for Clean Ganga. The new model is being adopted as previous plans to clean the Ganga failed. The flagship Namami Gange programme has a budget outlay of Rs 20,000 crore for the next five years.
The Stand Up India Scheme provides for refinance window through Sidbi with an initial amount of Rs 10,000 crore. It will also create a credit guarantee mechanism and provide hand holding support to borrowers both at the pre-loan stage and during operations.