Non Banking Finance Companies: Modi government has announced a slew of measures to provide support to housing finance companies that have been facing unprecedented liquidity crunch. While Reserve Bank of India last month announced liquidity facility of Rs 1.34 lakh crore to non-banking finance companies, National Housing Bank today announced additional Rs 10,000 crore window for housing finance companies. This additional liquidity provided by NHB is meant for individual borrowers buying housing units under affordable housing segment.
In addition to this, the guarantee measures announced by finance minister Nirmala Sitharaman in the Union budget for taking over NBFC loans have also come into effect. Under this provision, the Union government will stand guarantee to the extent of Rs 10,000 crore for banks if they take over the loans of financially sound Non-Banking Finance Companies (NBFCs).
Finance minister Nirmala Sitharaman is also meeting heads of all public sector banks on Monday to review the availability of credit to SME sector, retail, auto sector and affordable housing. This meeting will also be attended by major private sector banks.
Focus on SME sector
Realising the critical role played by small and medium enterprises in the country’s economy and employment generation, finance minister Nirmala Sitharaman will hold another meeting to sort out the problems faced by the SME sector. The expert committee headed by UK Sinha has made over 100 recommendations to ease the problems of SME sector. In its report submitted in June, the UK Sinha committee made recommendations about credit and equity funding to the small and medium companies, the issue of delayed payments, need for legislative changes, rural enterprises, self help groups, and creation of a specific fund by the government.
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Issue of delayed payment to SMEs
It is important for the government to find the solution of delayed payments to SMEs. Under the law, if any corporate or entity delays the payment to SME beyond 45 days from the date of bill submission then they must disclose this thing in their annual returns.
However, other than disclosure there is no penal provision to compel large companies to clear the dues of SMEs within time.
Finance minister Nirmala Sitharaman’s meeting next week will involve other ministries such as ministry of MSME, Ministry of Electronics and Information and Technology, Rural Affairs, Health and Family Welfare, Corporate Affairs, Departments of Commerce and Industrial Promotion, Telecom, Revenue, Expenditure.
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