The Finance Minister of India – Nirmala Sitharaman today, i.e., Saturday, August 1, 2020 said that the Government is working with the Reserve Bank of India (RBI) on the Industry’s need for restructuring of loans.
The move is aimed at combating the economic impacts arising out of Coronavirus (COVID-19). He remarks came as she addressed the National Executive Committee Meeting (NECM) of the Federation of Indian Chambers of Commerce and Industry (FICCI).
Speaking on the occasion, she said, “The focus is on restructuring. Finance ministry is actively engaged with RBI on this. In principle, the idea that there may be a restructuring required, is well taken.”
She assured the participants that every step which is announced by the Government is being implemented. She also said that every decision is made after consulting all the concerned stakeholders.
Referring to the concerns raised by the FICCI members on the difficulties faced by the Micro, Small and Medium Enterprises (MSMEs) in taking loans under the Emergency Credit Line Guarantee Scheme (ECLGS), she said that banks cannot refuse credit to MSMEs covered under emergency credit facility. In case they refuse, such instances must be reported to finance Ministry.
Responding to FICCI’s suggestion for creation of a Development Finance Institution to handle the emerging credit requirements of the industry, Sitharaman apprised the audience that the Government is working on the matter and will soon share the details. During her address, she also stressed the need for reciprocity in trade deals. She also stated that the decision on reducing the Goods and Services Tax (GST) rates on the healthcare and other products will be taken by the GST Council.
With regards to hospitality sector, Sitharaman told the audience that Finance Ministry is working with RBI on the demand of the hospitality sector for extension of moratorium, or restructuring.
She said, “I fully understand the requirements of the hospitality sector on extension of the moratorium, or restructuring. We are working with RBI on this.”
Appreciating the efforts undertaken by the Government, the President of FICCI – Dr. Sangita Reddy said, “While the green shoots of recovery are being seen, sustaining this improvement in the operational parameters of businesses will require continuous support from the government. The support is particularly needed in the realm of strengthening market demand and to boost demand.”
Separately, the Government of India today also increased the scope of the Rs. 3-lakh crores Micro, Small and Medium Enterprises (MSME) credit guarantee scheme. The Government has doubled the upper ceiling of loans outstanding to Rs. 50 crores and included certain individual loans given to professionals like doctors, lawyers and chartered accountants for business purposes under its ambit.
Addressing the media, the Finance Minister of India – Nirmala Sitharaman said that the changes in the Emergency Credit Line Guarantee Scheme (ECLGS) were made after the Government received requests from trade bodies and in line with the new MSME definition approved by the Union Cabinet in June 2020.
As per the new MSME definition, a unit with Rs. 50 crores of investment and Rs. 250 crores of turnover will fall under the medium enterprise category. A manufacturing and services unit with Rs. 1 crore of investment and Rs. 5 crores of turnover will be classified as micro unit. A unit involving Rs. 10 crores of investment and Rs. 50 crores of turnover will be categorised as a small enterprise.
Briefing the media, the Financial Services Secretary – Debashish Panda said that the maximum amount of Guaranteed Emergency Credit Line (GECL) funding under the scheme would also correspondingly increase from Rs. 5 crores to Rs. 10 crores. Announced under the financial stimulus of Rs. 20.97 lakh crores economic package to combat the economic impact of Coronavirus (COVID-19), the scheme now covers companies with an annual turnover of Rs. 250 crores as against the earlier Rs. 100 crores.
Sitharaman also said that the Government will soon come out with a new policy on public sector enterprises that will define strategic sectors which will not have more than 4 Public Sector Undertakings (PSUs).
