Banks reluctant to lend despite govt guarantee under collateral-free loan scheme, MSMEs tell Nitin Gadkari

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Updated: May 26, 2020 4:46 PM

Credit and Finance for MSMEs: Finance Minister Nirmala Sitharaman had earlier this month announced Rs 3 lakh crore scheme for collateral-free loans for MSMEs to provide emergency credit from banks and NBFCs.

Nitin Gadkari had announced enhancing the investment and turnover criteria for medium enterprises in the new definition. (File pic)

Credit and Finance for MSMEs: To ensure small businesses are able to secure collateral-free loans from banks under the new Rs 3-lakh-crore government scheme, MSME Minister Nitin Gadkari has sought feedback from units in the form of grievances to follow up with banks. The minister in a video conference with the members of the Calcutta Chamber of Commerce on the impact of Covid-19 on MSMEs asked them to send him the grievances if there are any problems in raising loan from banks for the government to follow up and resolve the credit crisis. Gadkari’s statement came in response to the concern raised around bank loan by the chamber. “Despite government giving sovereign guarantee (under Rs 3 lakh crore loan scheme), bankers are not coming forward,” said a member of Calcutta Chamber of Commerce.

Finance Minister Nirmala Sitharaman had earlier this month announced Rs 3 lakh crore scheme for collateral-free loans for MSMEs to provide emergency credit from banks and NBFCs up to 20 per cent of their entire outstanding credit as on February 29, 2020. The scheme is likely to benefit 45 lakh units as the government offered complete guarantee cover to lenders on principal as well as interest amounts, according to Sitharaman.

Also read: Airtel Payments Bank, Mastercard team up to develop customised financial products for farmers, SMEs

For revising the definition criteria for medium units, which Gadkari announced last week enhancing it to Rs 50 crore and Rs 200 crore in terms of investment and turnover respectively, the approvals from Finance Minister and Prime Minister’s Office are awaited. “I have thought about increasing the (criteria for) MSME definition but I need approvals of Finance ministry and PMO,” he said. Sitharaman had announced in the first of the five-tranche relief measures that the medium enterprises’ definition has been revised from earlier  Rs 5 and Rs 10 crore investment in plant and machinery by manufacturing and services units to Rs 20 crore investment limit and Rs 100 crore as turnover.

While Sitharaman had announced that MSME dues pending with the government and central public sector enterprises will be cleared in 45 days, Gadkari on Monday said that the amount stuck with such enterprises is around Rs 5 lakh crore. The minister again urged large businesses to clear MSME dues within 45-day period. The minister informed that 6 lakh MSME loan accounts have been restructured till March 2020 and the target is to restructure another 25 lakh accounts this year.

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