SIDBI gives life support to credit-deprived MSMEs; offers loan to NBFCs, MFIs for onward lending

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Updated: Apr 23, 2020 8:05 PM

Credit and Finance for MSMEs: The loans to be disbursed would be out of the Rs 15,000 ‘special liquidity facility’ that SIDBI received from the Reserve Bank of India recently to help MSMEs meet their credit needs.

covid-19, coronavirus, money moves for self employed, Covid-19 crisis, emergency fund, health insurance, loan, credit card duesSIDBI on Wednesday had announced ‘special liquidity support’ scheme for MSMEs.

Credit and Finance for MSMEs: Small Industries Development Bank of India (SIDBI) has announced offering 90-day term loans to NBFCs, MFIs, scheduled commercial banks, and small finance banks for onward lending to MSMEs to provide them ‘special liquidity support’ amid Covid-19 crisis. The announcement was made by SIDBI through a circular to NBFCs MFIs, and banks on Wednesday. The loans to be disbursed would be out of the Rs 15,000 ‘special liquidity facility’ that SIDBI received from the Reserve Bank of India recently to help MSMEs meet their credit needs. “The schemes would cover all eligible entities having investment-grade ratings irrespective of the size of the organization to ensure wider coverage,” the circular read.

“We are pretty confident that the entire money will be disbursed to them (NBFCs, MFIs, banks) because they are already under stress. Their funds inflow is affected because of the RBI three-month moratorium and even if the moratorium is not extended, we are not sure to what extent the ultimate beneficiaries they would start paying. Post moratorium also there will be some stress in inflows. So everything has gone haywire. Hence we feel Rs 15,000 crore will be lapped up by them, however, it is very difficult to estimate the number of MSMEs benefiting out of this,” a SIDBI official told Financial Express Online.

RBI-registered NBFCs in business for three years with Rs 20 crore in minimum net owned funds and Rs 50 crore of minimum asset size, external rating of BBB- or above and capital adequacy ratio above the RBI requirements would be eligible to secure loans from SIDBI. Similarly, MFIs running for at least three years and registered as a society, trust, co-operative society etc along with an external rating of BBB- or above and minimum MFI grading of MfR5, and capital adequacy ratio not below RBI requirement would be allowed to apply for the scheme, according to the circular signed by S N Singh, Chief General Manager at SIDBI.

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On the other hand, scheduled commercial banks should be in operation for three years with profits in at least two out of last three years, have a minimum net worth of Rs 100 crore, capital to risk weighted assets ratio (CRAR) of not less than 9 per cent and should have net NPA level within 10 per cent to seek loans under the scheme. Lastly for small finance banks should have been profitable for at least two out of the last three years, must have a net worth of at least Rs 100 crore, CRAR of 15 per cent or above and gross NPAs should not exceed 7 per cent. “All eligible banks, NBFCs and MFIs are encouraged to apply and make use of the above special liquidity facility being offered,” SIDBI said.

While the repayment period for NBFCs, MFIs and banks have been kept at 90 days but an extension can be given. “Loans can be secured in tranches that have to be paid back in 90 days as per the RBI rules. This is why our scheme is talking about 90 days payment. However, the extension can be considered on a case-to-case basis as banks may like to have a 90-day period, NBFCs may want around 180 days and MFI may need an even longer period to pay back. So rollover is possible,” the official said.

Meanwhile, bank credit to micro and small enterprises (MSE) declined marginally in February to 2.6 per cent from 3.1 per cent in the preceding month in the current financial year. From Rs 10.67 lakh crore credit deployed by banks as on March 29, 2019, the amount increased to Rs 11 lakh crore (3.1 per cent) as on January 31, 2020, and Rs 10.95 lakh crore (2.6 per cent) as on February 28, 2020, showed RBI data in its April bulletin. Earlier this month, RBI governor Shakitkanta Das had said that the bank is looking at running a sandbox for cohorts focusing on MSME lending. Das speaking at an Assocham event had said that it would boost innovation in the lending process for MSMEs. “In due course, we propose to run a regulatory sandbox for cohorts focussed on lending. This would promote innovation in MSME lending segment,” Das had said.

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