Coronavirus impact on economy: FM Nirmala Sitharaman holds meet to firm up response – The Financial Express

The Centre may also impress upon the RBI to consider extending beyond December 2020 a loan restructuring scheme for MSMEs, if the crisis lingers on well into the next fiscal.

Finance minister Nirmala Sitharaman huddled with ministers and top officials representing sectors like tourism, aviation, MSME and animal husbandry on Friday, amid mounting expectations that a relief package is in the offing for the sectors that have been hit hard by the coronavirus pandemic.

After the meeting, Sitharaman – who is heading a task force set up to prepare economic response to the pandemic – didn’t spell out details of likely relief measures but said the finance ministry was compiling the list of demands, and that she would also be meeting some other stakeholders on Saturday. A top government official told FE the demands will then be discussed at length with the Prime Minister’s Office and finalised.

According to sources, the government may support banks’ request for a temporary regulatory forbearance from the RBI on non-performing asset (NPA) classification, at least for firms in the troubled sectors – including MSME, tourism and aviation – that have witnessed a sharp deterioration of their cash flow. Similarly, the government could consider cash transfer to unorganised sector workers and daily wagers to soften the blow to them. Sectors like aviation, tourism and MSMEs are also seeking a deferment of the payment of various taxes, including GST, until the situations stabilises.

Already, as many as 81% of respondents in a Ficci survey suggested that their cash flow had been hit by the Covid-19 outbreak and 73% said their order book had crashed. Around half a dozen established agencies, including S&P and Moody’s, have trimmed their FY21 India economic growth forecast to the range of just 5.1% to 5.4%.

The MSME ministry is keen on a moratorium on repayment of loans by MSMEs and has asked for an expeditious clearance of dues owed by various government departments and PSUs to MSMEs. The Centre may also impress upon the RBI to consider extending beyond December 2020 a loan restructuring scheme for MSMEs, if the crisis lingers on well into the next fiscal.

Collateral-free loans to MSMEs with good repayment history will likely be considered as well. Bankers have already told the government that, given the enormity of the crisis, bad loans will spike if NPA norms are not suitably relaxed, and even good accounts will turn bad, according to industry sources.

Commenting on the Sebi move on short-selling and others areas, the minister said the regulator has “introduced certain measures keeping in view the objective of ensuring orderly trading and settlement, effective risk management, price discovery, and maintenance of market integrity”.

As such, the slowdown in credit flow to MSMEs has remained a critical issue for months now. While loans to micro and small units barely rose by 0.5% year-on-year as of January 31, those to medium enterprises went up by just 2.8%, much lower than the 8.5% growth in the overall non-food credit. However, credit to tourism, hotels and restaurant segment grew by an impressive 17.4% y-o-y as of January 31, while that to commercial real estate rose by 14.7%, much higher than the 8.9% rise in the overall services segment.

Sitharaman held the series of meetings with animal husbandry and dairying minister Giriraj Singh, aviation minister Hardeep Singh Puri and tourism minister Prahlad Singh Patel. Finance secretary AB Pandey, economic affairs secretary Atanu Chakraborty and the top bureaucrats of MSME, tourism, aviation and animal husbandry departments, too, attended the meetings.

via Coronavirus impact on economy: FM Nirmala Sitharaman holds meet to firm up response – The Financial Express

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