Credit and Finance for MSMEs: FICCI suggested the government to extend the direct cash benefit to MSMEs without complicated paperwork.
Credit and Finance for MSMEs: Micro, small and medium enterprises (MSMEs), which have a share of around 29 per cent in India’s GDP, have been bruised and battered by the Coronavirus outbreak and the subsequent lockdown. To provide a thrust to the MSME sector, trade association FICCI in its latest round of Business Confidence Survey suggested the government few measures to boost liquidity and employment. A financial package for the entire industry, especially MSMEs, is required “in the form of subsidies, policy support, tax holidays, special dispensation of funds to sustain employment levels before Covid-19 pandemic etc.” FICCI suggested government.
“Nobody knows when the current situation will improve. MSMEs mostly have old employees and they don’t want to let them go. But at the end of the day whatever they are paying is coming from their own savings. They don’t have so much wealth to payout. So first thing is to provide MSMEs loan as you need to be available,” Archana Garodia Gupta, a small business expert and former National Chair, FICCI MSME Committee told Financial Express Online.
Among other key suggestions made to the government included direct cash benefit to be extended to MSMEs without complicated paperwork and providing support to MSME vendors by enhancing procurement from them.
Finance Minister Nirmala Sitharaman had announced a slew of measures in March to give respite to businesses including small businesses. For instance, interest rate cut from 12 and 18 per cent to 9 per cent charged on delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, securities transaction tax, commodity transaction tax made between March 20, 2020, and June 30, 2020. The minister had also extended the GST return filing date for FY19 from March 31, 2020, to the last week of June 2020.
FICCI also suggested the RBI to direct banks to enhance credit limit by at least 25 per cent without asking for collateral security. “Further, the need for collateral for MSMEs and startups must be completely done away with for some time,” it said in the survey. The association also suggested banks to “enhance funds available to the industry especially small and medium scale industry.”
“Most MSMEs have accounts with banks. The government should designate up to 25 per cent of the current cash credit limit as special Covid fund and let it guarantee that money to the bank. It is alright to give a sop to the bank as it makes them more inclined to lend as banks are usually reluctant to lend even if they have funds,” said Gupta. In order to ease liquidity among MSMEs, RBI had last week said that it will conduct long-term repo operations (TLTRO) of Rs 50,000 crore with at least 50 per cent of the amount availed going to small and mid-sized NBFCs and MFI, the RBI governor Shaktikanta Das had said.