Finance Minister Nirmala Sitharaman asked private lenders to provide liquidity support to small businesses and effectively implement the credit-guarantee scheme rolled out to ease the economic crisis triggered by Covid-19 pandemic.
The feedback from Sitharaman came during a video-conference held to ensure effective rollout of the Emergency Credit Line Guarantee Scheme, the Department of Financial Services said in a tweet. This comes after media reports said that Laghu Udyog Bharti, an industry lobby associated with the Rashtriya Swayamsevak Sangh, the ideological parent of the ruling Bharatiya Janata Party, raised concerns that private banks are not implementing the scheme.
The government has offered to provide a 100% credit guarantee on collateral- free loans up to Rs 3 lakh crore to micro, small and medium enterprises, and interested Mudra borrowers. It's backed by the National Credit Guarantee Trustee Company Ltd., for which the government will contribute Rs 41,600 crore worth of capital over the current and next three financial years.
Some private lenders have already implemented the scheme, and some will roll it out in the next few days, said a government official. This would help in more businesses availing the benefit, he said.
As the economy opens after the unprecedented lockdown, small businesses in India are expected to see an up to 21% decline in revenue and their operating margin could shrink to less than 5% due to weak demand, Crisil has estimated.
“A sharp decline at the operating level will also impact creditworthiness, aggravating the liquidity stretch these units have been grappling with, particularly on the working capital front,” it said, citing speedy implementation of the credit guarantee scheme as one of the ways to revive demand quickly.
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