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The Reserve Bank of India on Sunday said lending institutions should assign zero% risk weight on the credit facilities extended under the Emergency Credit Line Guarantee Scheme to MSME borrowers announced by the government in the wake of COVID-19 pandemic. The government in May introduced the Emergency Credit Line Guarantee Scheme (ECLGS) for providing 100% guarantee coverage for additional working capital term loans (in case of banks and financial institutions) and additional term loans (in case of NBFCs) up to 20% of their entire outstanding credit up to Rs 25 crore as on February 29, 2020. The credit facility is guaranteed by the National Credit Guarantee Trustee Company (NCGTC). "As credit facilities extended under the scheme guaranteed by NCGTC are backed by an unconditional and irrevocable guarantee provided by Government of India, it has been decided that Member Lending Institutions shall assign zero percent risk weight on the credit facilities extended under this scheme to the extent of guarantee coverage," the RBI said in a notification. Lending institutions include, banks, eligible NBFCs and HFCs, and All India Financial Institutions (SIDBI, NHB, NABARD, EXIM Bank). In a separate release, the RBI said the central government has re-nominated Natarajan Chandrasekaran as a part-time non-official Director on the Central Board of Reserve Bank of India, for a further period of two years beyond March 3, 2020, or until further orders. SEE ALSO: <a href="https://www.businessinsider.in/finance/news/only-5-of-the-governments-msme-emergency-loan-package-is-disbursed-after-a-month/articleshow/76437386.cms">Only 5% of the government’s MSME emergency loan package is disbursed after a month ⁠— private banks are sitting tight</a> <a href="https://www.businessinsider.in/business/corporates/news/bajaj-finance-share-price-and-earnings-expectation/articleshow/75751469.cms">Bajaj Finance’s quarterly earnings may not reflect the real potential for rebound⁠ after Sitharaman’s big push for MSME</a> <a href="https://www.businessinsider.in/india/news/fm-nirmala-sitaraman-announces-six-steps-for-msme-sector/articleshow/75717258.cms">Finance Minister Nirmala Sitharaman announces six measures for the MSME sector</a>

RBI tells banks to assign 'zero' risk for emergency loans to MSME

<ul><li>The <keyword id="6358354" type="General" weightage="20" keywordseo="MSME" source="Orion">MSME</keyword> sector is undergoing a quiet but steady revival, going by the increase in credit demand and a moderation in NPAs over the last one year.</li><li>A new report has revealed that thanks to the Indian government’s ECLGS scheme, credit demand in the MSME sector has surged rapidly.</li><li>A closer look at the data also suggests that the micro enterprises will need more assistance and time to recover, while the medium enterprises have rebounded the most.</li></ul>Micro, small and medium enterprises (MSMEs) are a critical cog of the Indian economy, contributing nearly a third to the country’s GDP and half of its exports. Now, in signs of a pickup in economic activity, a new report has outlined that <keyword id="5974967" type="General" weightage="20" keywordseo="MSME-credit" source="Orion">MSME credit</keyword> demand is now 60% higher than pre-pandemic levels. Given the importance of the MSME sector to the Indian economy, the Indian government <a href="https://www.businessinsider.in/india/news/fm-nirmala-sitaraman-announces-six-steps-for-msme-sector/articleshow/75717258.cms">announced the emergency credit line guarantee scheme (ECLGS) during the first wave of the Covid-19 pandemic</a> in the form of a ₹3 lakh crore assistance. This was part of the government’s <a href="https://www.businessinsider.in/policy/economy/news/top-highlights-of-finance-minister-nirmala-sitharaman-speech-on-modi-20-lakh-crore-covid-19-stimulus/articleshow/75714287.cms">larger ₹20 lakh crore stimulus package</a>. The scheme was subsequently extended <a href="https://www.businessinsider.in/finance/news/finance-ministry-extends-emergency-credit-line-guarantee-scheme-till-march-2022/articleshow/86614510.cms">multiple times</a> – with the latest extension lasting up to<a href="https://economictimes.indiatimes.com/news/economy/policy/eclgs-scheme-extended-up-to-march-2023-fm-in-budget/articleshow/89266078.cms"> March, 2023</a>. These measures, according to a MSME Pulse report by credit bureau Transunion <keyword id="6380215" type="General" weightage="20" keywordseo="Cibil" source="Orion">Cibil</keyword> and <keyword id="6391656" type="General" weightage="20" keywordseo="SIDBI" source="Orion">SIDBI</keyword>, have boosted growth in MSME credit demand as well as disbursements – although lenders are prioritising existing borrowers over new ones. <div type="image" title="Credit demand Q4 FY22." msid="93457276" hostid="261" caption="&amp;lt;p&amp;gt;Credit demand amongst MSMEs&amp;lt;/p&amp;gt;"></div> According to the report, credit demand has surged 60% when compared to the pre-pandemic levels, while commercial credit inquiries have also picked up pace in the last one year. Both these metrics are signs of a recovery in economic and business activity, the report stated. <cmsannotation type="cmsannotation" annotationid="Private lenders more proactive than public sector banks – NBFCs stage a recovery, too" comment="subhead" text="Private lenders more proactive than public sector banks – NBFCs stage a recovery, too">Private lenders more proactive than public sector banks – NBFCs stage a recovery, too</cmsannotation> Interestingly enough, private sector lenders – banks and financial institutions – are a little more proactive than public sector banks in issuing credit. Specifically, while credit from private lenders has seen a 69% increase, that from public sector banks has jumped 60%. Non-Banking Financial Company (NBFCs), which saw a decline in issuing credit in the December 2021 quarter, have since recovered quickly. <div type="image" title="Lender wise credit Q4 FY22." msid="93457315" hostid="261" caption="&amp;lt;p&amp;gt;Lender-wise credit&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="Disbursements growing steadily" comment="subhead" text="Disbursements growing steadily">Disbursements growing steadily</cmsannotation> After plunging during the second wave of Covid-19, credit disbursements have seen a steady growth since then, with the biggest rebound seen in the September 2021 quarter. <div type="Article" hostid="261" msid="93366552" title="Globalized inflation is a threat to global economy itself, says RBI guv Das" mstype="2" mssubtype="0"></div> Interestingly, small enterprises have been beneficiaries of the largest disbursements, followed by medium and micro enterprises. <div type="image" title="MSME loan disbursements Q4 FY22." msid="93457345" hostid="261" caption="&amp;lt;p&amp;gt;MSME loan disbursements&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="Medium enterprises show highest growth in loan size" comment="subhead" text="Medium enterprises show highest growth in loan size">Medium enterprises show highest growth in loan size</cmsannotation> The average loan size has increased rapidly – by nearly 50% – in the medium enterprises segment to ₹1.4 crore, from ₹95 lakh during the first wave of Covid-19. For micro enterprises, they have remained stagnant at ₹9 lakh, in comparison. <div type="image" title="MSME loan size Q4 FY22." msid="93457375" hostid="261" caption="&amp;lt;p&amp;gt;MSME loan size&amp;lt;/p&amp;gt;"></div> <cmsannotation type="cmsannotation" annotationid="NPAs are on the rise in the micro segment" comment="subhead" text="NPAs are on the rise in the micro segment">NPAs are on the rise in the micro segment</cmsannotation> The medium enterprises segment has the highest rate of non-performing assets (NPAs) in the MSME sector, followed by the micro and the small segments. Interestingly, the micro segment has seen a bigger increase in NPAs, while the small and medium segments have seen a relatively moderate increase when compared to the first wave of Covid-19. Over the last one year, though, NPAs across all the three segments are on the decline, having peaked during the second wave of Covid-19 last year. <div type="image" title="MSME NPAs Q4 FY22." msid="93457389" hostid="261" caption="&amp;lt;p&amp;gt;MSME NPAs&amp;lt;/p&amp;gt;"></div> SEE ALSO: <a href="https://www.businessinsider.in/business/news/mukesh-ambani-is-all-set-to-do-a-jio-with-green-energy/articleshow/93432238.cms">Mukesh Ambani is all set to do a ‘Jio’ with green energy</a> <a href="https://www.businessinsider.in/stock-market/news/why-tejas-fighter-aircraft-maker-hal-share-price-up-in-2022/articleshow/93426056.cms">This defence sector stock boosted investor wealth by 75%</a> <a href="https://www.businessinsider.in/finance/news/rbi-hikes-repo-rate-by-50-basis-point-to-5-4-as-inflation-is-still-uncomfortable/articleshow/93362291.cms">RBI hikes repo rate by 50 basis point to 5.4% as inflation is still ‘uncomfortable’</a>

MSME credit demand jumps 60% from pre-pandemic levels – a sign of rebound in economic activity

<ul><li>There are over 6.3 crore micro, small and medium enterprises (MSMEs) in India, majority of which are micro and small enterprises.</li><li>Majority of Indian MSME have a turnover of less than ₹40 lakhs, but do not have access to any kind of loan, CEO of Chqbook added.</li><li>The challenges in the assessment of requirement is one of the major reasons why the India MSME have been financially excluded.</li></ul>There are over 6.3 crore micro, small and medium enterprises (MSMEs) in India and most of them are facing one major problem — access to capital. Whether it is investment opportunities or credit facilities, Indian MSMEs have been largely financially excluded. Gaurav Shahlot, head of product at Khatabook, in a conversation with Business Insider India, noted that credit has been a challenge for the Indian MSMEs as they need small amounts of capital for a short period of time. “They also needed very, very frequently, whether it's for purchasing an inventory or financing an invoice,” he added. Vipul Sharma, founder and CEO of Chqbook, noted that a majority of Indian MSMEs have a turnover of less than ₹40 lakhs, which is also the segment that does not have to pay any Goods and Services Tax (GST). “That segment has done better... The access to credit is definitely a challenge,” he added, saying that less than two crore of the total six crore MSMEs have taken any loan. Even though the Reserve Bank of India (RBI) has made MSME into a priority lending sector, the lack of data on these small businesses hasn’t been helping. Yet, fintechs and digital businesses have been gearing up to lend to small businesses, who have been left out of the financial system for too long. Shahlot noted that the intervention of technology has created several touchpoints for MSMEs, making it easier to underwrite loans. He noted that it has also created a lot of different modes of credit lines such as distributor-to-retailer model where retailers are financed on the back of the purchases; Buy-Now-Pay-Later solutions where lenders are financing a purchase by directly paying the supplier and much more. Just like traditional lenders, even fintechs are facing similar challenges but have devised alternate ways to disburse these loans and credit lines. <cmsannotation type="cmsannotation" annotationid="But there must be some shortcomings to this as well" comment="subhead" text="But there must be some shortcomings to this as well">But there must be some shortcomings to this as well</cmsannotation> “The lenders also face certain challenges because the data and information, which is required for processing the credit lines or pretty facilities, is not easily available… It's not even authenticated. Because the operations [of these MSME] are such small level operations it becomes difficult for them [lenders] also,” Kishor Kharat, former MD and CEO of IDBI Bank and Indian Bank, said. He noted that the biggest challenge in the MSME lending has been the assessment of requirements. Some of these MSMEs operate on such a small scale that they have not been audited and sometimes it is even difficult to calculate their turnover. UPI and QR-based payments have made the assessment of turnover and requirement somewhat easier, but a fully computerized operation would be a “dream situation” for assessment of these requirements, Kharat added. While it is all good, the impact of fintechs is still on the surface. Kharat noted that fintechs are largely serving audiences in urban areas, and the MSMEs in the rural regions have still not been able to reap the benefits of these companies. He believes roughly 5-10% MSMEs must have benefited from the technology intervention. Loans amounting to ₹3.32 trillion have been sanctioned under the Emergency Credit Line Guarantee Scheme (ECLGS) till April 30, 2022. About ₹2.54 trillion had been disbursed. “Even though the Reserve Bank of India has stipulated this [MSMEs] under priority sector lending, banks find it difficult to lend to micro and small MSMEs [which makes up for roughly 95% of the industry] whereas medium category people get more credit support,” Kharat noted. SEE ALSO <a href="https://www.businessinsider.in/business/startups/news/karan-virwani-kunal-shah-and-4-other-startup-ceos-invest-in-a-real-estate-venture/articleshow/92829944.cms">Karan Virwani, Kunal Shah and 4 other startup CEOs invest in a real estate venture</a> <a href="https://www.businessinsider.in/careers/news/mba-chai-wala-is-now-looking-to-hire-500-people-for-100-new-stores/articleshow/92828283.cms">From a small thela to 100 stores — MBA Chai Wala is now looking to hire 500 people for 100 more</a> <a href="https://www.businessinsider.in/business/corporates/news/cement-companies-are-girding-for-tougher-times-as-rising-fuel-costs-bite/articleshow/92822829.cms">Cement companies are girding for tougher times as rising fuel costs bite</a>

Fintechs are helping Indian MSMEs with their biggest challenge — data and the lack of it

Kochi, Feb 1 (PTI) The Cochin Chamber of Commerce and Industry, the oldest Chamber of Commerce in Kerala, on Tuesday welcomed the announcements made by Union Finance Minister Nirmala Sitharaman in the budget, saying it would improve ease of doing business in the country. "We appreciate the steps taken by the government to facilitate and improve ease of doing Business in India. The gross GST collections of Rs 1,40,986 crores for the month of January 2022, which is the highest since the inception of GST, indicate that we are on the path of recovery reviving the hope for a brighter future", the Chamber said in a statement here. It said the Government's proposal to launch One Nation One Registration software is ambitious and welcome. "This would reduce the burden on the stakeholders during the process of registration of deeds and documents", the Chamber said. Noting that the promise to develop One hundred PM GATI SHAKTI Cargo Terminals in the next three years is a step in the right direction, it said this could trigger a logistics revolution in the country if implemented properly with the inclusion and support of state governments and other relevant stakeholders. The Chamber said One station One product scheme could also be a gamechanger in promoting local products and supporting local businessmen and farmers. "The Extension of Emergency Credit Line Guarantee Scheme (ECLGS) up to March 2023 is a major relief to the MSME sector, especially the hospitality and related service that is struggling to sustain during the pandemic", it said. The Chamber said the additional support to MSMEs in the form of RAMP is equally commendable. "The Allocation of 6,000 crore for RAMP (Raising and Accelerating MSME Performance) is expected to help the MSME sector become more resilient, competitive and efficient", it said. From the information technology point of view, announcements like the plan to roll out 5G services in 2022-23 and RBI's Digital Currency deserves appreciation, the chamber said but insisted on the need to have wider consultations with stakeholders and experts before finalisation of the Cryptocurrency policy framework. It also hailed the proposed reforms in the working of Special Economic Zones, saying it is expected to boost the export sector. "The reformed framework of SEZs should adequately involve the state governments and reputed industry organisations for smoother and effective functioning", the chamber said. Commenting on the budget, K Paul Thomas MD &amp; CEO, ESAF Small Finance Bank, said it was a road map for the country, with a focus on all key sectors. The introduction of Edu tech, fintech and upskilling schemes along with a digital push will define the sustainable growth trajectory for the coming years, he said in a statement. Thomas said the budget also gives a much-needed thrust to the Infrastructure, MSME and agricultural sectors to make them more resilient and competitive when the adverse impact of the pandemic is yet to recede. He said "the focus on infrastructure will surely remain as a foundation that takes India to the next level when we reach 100 years of independence". Noting that the focus on education is well exemplified in the plan for a digital university, Thomas said as campuses are allowed to open in Gift Cities and specific finance and fintech courses by global universities are encouraged, there is an immense possibility for growth in the sector. "As Kerala is planning to have the country's second Gift city in Kochi this will be a great boost for the state's higher education sector", he said. PTI TGB BN BN

Cochin Chamber welcomes union budget announcements

Mumbai, Jun 12 () State-run Central Bank of India (CBI) on Friday said it has introduced a guaranteed emergency credit line for MSMEs and small business borrowers who are struggling to restart their businesses in the wake of the COVID-19 outbreak. These customers can avail an additional working capital term loan (WCTL) of up to 20 per cent of their combined fund based outstanding as on February 29, 2020 with a maximum limit of Rs 5 crore, the bank said in a release. The interest rate is linked to an external benchmark, which is the repo rate, with a cap of 7.50 per cent per annum. It has also fully waived the processing charges for these loans. "No penal interest is to be recovered and no guarantee fee is to be charged from the customer to cover the loan under Emergency Credit Line Guarantee Scheme (ECLGS) for providing 100 per cent guarantee coverage for such additional working capital term loans," the bank said. The government had announced the ECLGS last month as part of its stimulus package for the coronavirus-hit economy. The lender further said it has reduced the interest rate for external benchmark linked accounts by 0.40 per cent after a similar cut in repo rate by the RBI last month. It is offering new home loans at an interest rate of 6.85 per cent per annum. HV ABM ABM

Central Bank of India launches emergency credit line for MSMEs

New Delhi, Jun 22 () The finance ministry on Monday said banks have sanctioned over Rs 75,000 crore loans so far under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector reeling under stress due to the coronavirus-induced lockdown. However, loans worth Rs 32,894.86 crore are disbursed under the 100 per cent ECLGS for the micro, small and medium enterprises (MSMEs), starting June 1. The scheme is the biggest fiscal component of the Rs 20-lakh crore Aatmanirbhar Bharat Abhiyan package announced by Finance Minister Nirmala Sitharaman last month. "The total amount sanctioned under the 100% Emergency Credit Line Guarantee Scheme by #PSBs and private banks stands at Rs 75,426.39 crore, of which Rs 32,894.86 crore has already been disbursed," Sitharaman said in a tweet. The latest number released by the Finance Minitry comprises all 12 public sector banks (PSBs) and 16 private sector banks. "Under the 100% ECLGS, the loan amounts sanctioned by Public Sector Banks increased to Rs 42,739.12 crore, of which Rs 22,197.54 crore has been disbursed," she said in another tweet. Meanwhile, private sector banks sanctioned Rs 32,687.27 crore while disbursed Rs 10,697.33 crore so far. It is to be noted that the RBI on Sunday said lending institutions should assign zero per cent risk weight on the credit facilities extended under the ECLGS to MSME borrowers. On May 21, the Cabinet had approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent through ECLGS for the MSME sector. Under the scheme, 100 per cent guarantee coverage will be provided by National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers, in the form of a guaranteed emergency credit line (GECL) facility. For this purpose, a corpus of Rs 41,600 crore was provided by the government, spread over the current and next three financial years. The scheme will be applicable to all loans sanctioned under GECL facility during the period from the date of announcement of the scheme to October 31 or till an amount of Rs 3 lakh crore is sanctioned under GECL, whichever is earlier. The main objective of the scheme is to provide an incentive to member lending institutions to increase access and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by giving them 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers. All MSME borrower accounts with an outstanding credit of up to Rs 25 crore as on February 29, which were less than or equal to 60 days past due as on that date, i.e., regular, SMA-0 and SMA-1 accounts, and with an annual turnover of up to Rs 100 crore, would be eligible for GECL funding under the scheme. DP MKJ

Banks sanction over Rs 75,000-cr loans to MSMEs under credit guarantee scheme

New Delhi, May 20 () Finance Minister Nirmala Sitharaman will hold a review meeting with CEOs of public sector banks (PSBs) on Friday to discuss various issues, including credit offtake, as part of efforts to prop up the coronavirus-hit economy, sources said. The meeting was earlier scheduled on May 11, but due to the stimulus package announcements, it was deferred, they added. The meeting, to be held via video-conferencing, will also take stock of interest rate transmission to borrowers by banks and progress on moratorium on loan repayments, the sources said. The RBI had on March 27 slashed the benchmark interest rate by a massive 75 basis points and also announced a three-month moratorium to be given by banks to provide relief to borrowers whose income has been hit due to the lockdown. Besides, CEOs of public sector financial institutions will also be present at the meeting. The meeting assumes significance in light of the over Rs 20 lakh crore comprehensive economic package announced for the economy reeling under the COVID-19 crisis. The Union Cabinet headed by Prime Minister Narendra Modi on Wednesday approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent through the Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector hit hard by the coronavirus crisis. Earlier this month, RBI Governor Shaktikanta Das held a meeting with heads of both public and private sector banks to take stock of the economic situation and review implementation of various measures announced by the central bank. The deployment of excessive funds by banks under the reverse repo route may also come up for discussion on Friday, sources said. Besides, progress under the targeted long-term repo operations (TLTRO) for the NBFC sector and microfinance institutions (MFIs), and sanctions under the COVID-19 emergency credit line will also be reviewed. DP ABM ABM

FM to meet PSU bank chiefs on Friday, to review credit flow

Mumbai, May 23 () State-run Bank of Baroda on Saturday said it can offer up to Rs 12,000 crore in loans to MSMEs under the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) announced by the government. Last week, Finance Minister Nirmala Sitharaman had announced a 100 per cent credit guarantee scheme worth Rs 3 lakh crore to support the medium, small and micro enterprises (MSMEs) which have been adversely affected by the coronavirus crisis. All existing MSME borrowers with outstanding credit of up to Rs 25 crore as on February 29 and with an annual turnover of up to Rs 100 crore would be eligible for funding under the scheme. "In our case, that particular portfolio amounts to be Rs 58,000 crore. So, 20 per cent of that would be around Rs 10,000 crore to Rs 12,000 crore. This, we can make available to our MSME clients in the times to come under the guaranteed scheme of the government," the bank's Managing Director and CEO Sanjiv Chadha told reporters through a video conference. The ECLGS was the second-biggest component of the over Rs 20 lakh crore comprehensive package announced by the government for the coronavirus-hit economy. Under the scheme, 100 per cent guarantee coverage will be provided by the National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Mudra scheme borrowers, in the form of a guaranteed emergency credit line (GECL) facility. The amount of GECL funding to eligible MSME borrowers, either in the form of additional working capital term loans (in case of banks and financial institutions) or additional term loans (in case of NBFCs), would be up to 20 per cent of their entire outstanding credit of up to Rs 25 crore as on February 29, 2020. Chadha further said under the COVID-19 emergency credit line launched in March, the bank has so far sanctioned Rs 3,000 crore in loans and disbursed Rs 1,500 crore to MSMEs. Nearly, 60-70 per cent of the bank's borrowers have availed the three-month moratorium on repayment of term loans announced in March by the RBI. "In terms of people availing the moratorium, it was around 60-70 per cent, although 90 per cent or more would have been eligible for that," he said. On Friday, State Bank of India Chairman Rajnish Kumar had said close to 20 per cent of the bank's borrowers had availed moratorium on repayment of term loan instalments. The RBI on Friday extended the moratorium for another three months to August 31, 2020. Chadha sees the number of people availing moratorium declining going forward as economic activities resume. The bank has not offered a moratorium to NBFCs but is now considering granting them the facility on a case-to-case basis, he said. "That (moratorium to NBFCs) is something which is being considered by us. We are clear that regardless of the category of borrowers, whether an NBFC, an industrial borrower, MSME or home loan borrowers, you do need to address what are very genuine requirements at this point of time," he said. "Therefore, when it comes to our NBFC borrowers, particularly the smaller ones where dependence on some banks would be little more, and where access to alternative sources of funding is not available, it (offering moratorium) becomes a simpler decision," Chadha said. According to him, the bank is well capitalised currently but may look to raise tier-1 capital to build its capital buffer. "In terms of the equity market, it is not the best time. But we could be in the market for possibly tier-1 capital over the next two months," he added. HV ABM ABM

Bank of Baroda to offer up to Rs 12k cr loans to MSMEs under credit guarantee scheme

New Delhi, May 22 () Finance Minister Nirmala Sitharaman on Friday held a review meeting with CEOs of public sector banks (PSBs) and asked them to implement the mega 'Aatmanirbhar' relief package to revive the COVID-hit economy. The meeting via video conferencing took place in the backdrop of the Rs 21 lakh crore stimulus package announcement and the Reserve Bank coming out with fresh measures, including interest rate cuts. The Union Cabinet headed by Prime Minister Narendra Modi on Wednesday gave its nod for many of the schemes announced as part of 'Aatmanirbhar Bharat Abhiyan' package to prop up the economy reeling under the COVID-19 crisis. "Finance Minister Smt.@nsitharaman chairing the review meeting, through VC, with the chief executives of PSBs today to review the readiness of banks in implementing 'Aatmanirbhar' relief package," the Finance Ministry said in a tweet. "To operationalise the announcements made by Hon'ble FM @nsitharaman ji under #AatmanirbharBharat, review meeting through VC was held with all PSBs. Everyone aligned on the need for quickly addressing the needs of MSMEs &amp; other customers. Operational details to be released soon," the Department of Financial Services, Ministry of Finance, said in a tweet. The finance minister has emphasised on the quick disbursal of additional loans to MSMEs, to simplify process, formats and documentation, Indian Bank managing director Padmaja Chunduru said after the meeting. Since the Union Cabinet has already given approval to various schemes announced under the package, operational guidelines have been issued to banks. The most important among them is the Emergency Credit Line Guarantee Scheme (ECLGS) worth Rs 3-lakh crore for MSMEs hit hard by the coronavirus crisis. The 100 per cent guarantee scheme at the concessional rate of 9.25 per cent was the second-biggest component of the Rs 20 lakh crore comprehensive package announced by Sitharaman last week. Currently, the rate of interest on loans given by banks to the MSME sector varies from Rs 9.5 per cent to 17 per cent, depending on the risk perception. The MSME sector is considered as the backbone of country's economy as the sector contributes over 28 per cent of the GDP and more than 40 per cent of exports, while creating employment for about 11 crore people, second highest after agriculture. The scheme is expected to benefit 45 lakh MSME units. Other scheme to help the stressed MSME sector also included Rs 20,000 crore subordinate debt for stressed or loan defaulting MSMEs, which could benefit 2 lakh such businesses. A fund of funds for MSME is also being created, which will infuse Rs 50,000 crore equity in MSMEs with growth potential. After the meeting, Central Bank of India managing director and CEO Pallav Mohapatra said the finance minister took stock of the situation and reviewed the progress of various schemes. "All the banks are very-very optimistic about the schemes that have been announced in the recent past by the government to support the economy. State-run banks sanction in the COVID-19 period is more than the corresponding period last year, which was a normal year," he said. "Loans worth over Rs 6.68 lakh crore were sanctioned by PSBs during March 1 - May 19 for 59.79 lakh accounts from MSME, Retail, Agriculture &amp; Corporate sectors. A steady increase in credit availability for each of these vital sectors" the finance ministry had tweeted earlier in the day. "Public Sector Banks sanctioned over Rs 1.07 lakh crore as emergency credit lines &amp; working capital enhancements in the period March 20 to May 19, with Rs 25,527 crore of this amount already being availed by customers," it said. Later, in an interview with DD News, the finance minister said the meeting with the public sector banks was "very good". She commended the work done by the public sector banks for the implementation of the Rs 1.70 lakh crore PM Garib Kalyan Yojana, which was an announcement made within two days after the lockdown was announced. "I must give credit to the public sector banks for having done a splendid job in implementing PM Garib Kalyan Yojana. So now with that same spirit this (Rs 20 lakh crore) package we have come up with, a partial guarantee, full guarantee for all enterprises... which banks will have to do. I was very reassured that the banks spoke in a very positive way," she said. On the credit guarantee scheme, Mohapatra said the government's commitment is for the entire Rs 3 lakh crore. "The commitment on the government under this Rs 3 lakh crore collateral free loans is 100 per cent." During deliberations, Indian Bank's Chunduru said, "Banks decided to focus also on Tier Ii and Tier III towns in all states to ensure needy MSMEs get the succour. CEOs of PSBs welcomed the Rs 3 lakh crore fully guaranteed loan component to MSMEs and assured the FM that all eligible units will get these loans promptly." Central Bank's Mohapatra said, "Risk aversion, to a great extent, has gone. No actions are being taken for any commercial decision going wrong because of other reasons." The meeting also took stock of interest rate transmission to borrowers by banks and progress on moratorium on loan repayments. The RBI has increased the moratorium on loan repayment by another three months till August 2020 to provide relief to borrowers whose income has been hit due to the crisis. DP MKJ

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RBI tells banks to assign 'zero' risk for emergency loans to MSME

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MSME credit demand jumps 60% from pre-pandemic levels – a sign of rebound in economic activity

Rounak Jain

Fintechs are helping Indian MSMEs with their biggest challenge — data and the lack of it

Kritti Bhalla

Cochin Chamber welcomes union budget announcements

PTI

Central Bank of India launches emergency credit line for MSMEs

PTI

Banks sanction over Rs 75,000-cr loans to MSMEs under credit guarantee scheme

PTI

FM to meet PSU bank chiefs on Friday, to review credit flow

PTI

Bank of Baroda to offer up to Rs 12k cr loans to MSMEs under credit guarantee scheme

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