Clipped from: https://www.thehindubusinessline.com
Union Finance Minister Nirmala Sitharaman – PTI
Union Finance Minister Nirmala Sitharaman – PTI×
Govt in talks with RBI to work out a plan, says Finance Minister
The government is actively considering an one-time loan restructuring facility for non-MSME (Medium Small and Micro Enterprises) borrowers who have been badly hit by the pandemic and the resultant disruption.
This was revealed by Finance Minister Nirmala Sitharaman while participating in a webinar on MSMEs organised by Chennai International Centre (CIC). An “intense engagement” is on with the RBI to come up with such a scheme, she said adding, “There is a lot of stress now”.
The RBI has already offered such a facility for MSMEs and the scheme has already been extended till December.
The demand for an one-time loan restructuring option has gained traction in recent weeks.
Cash flows have been seriously hit as revenues dwindled due to the complete lockdown. Many businesses are worried about meeting their debt obligations once the moratorium is lifted and that their loans could become a non-performing asset. A one-time restructuring will help businesses in these difficult times.
There was also some good news for sole proprietorships. In response to various suggestions from CIC members, the Minister said that the government will consider extending the ₹3 lakh-crore emergency line of credit that is currently offered to MSMEs, to sole proprietorships.
CIC members pointed out that many deserving small businesses which were not partnerships, especially in the road transport sector, were being denied this facility. This, they said, was against the spirit of the scheme.
The Minister denied that private banks were hesitant in disbursing the emergency line of credit to MSMEs. She said public sector banks have disbursed ₹22,197 crore under the scheme while private sector banks have given ₹10,697 crore. She, however, agreed that private sector banks need to pick up the pace of lending on this front.
Rate cut transmission
On interest rates Sitharaman said that the government is talking with banks and RBI on the slow pace of rate-cut transmission. The reasons the banks are offering are not convincing, she said adding “we will come up with a fair solution”.
Earlier in her opening remarks, the Finance Minister called for introspection on how businesses are being currently and on Atmanirbhar Bharat. Taking the example of the pharmaceutical industry, she asked why India, once a major player in the bulk drug space, is today dependent on other countries for nearly 70 per cent of its active pharmaceutical ingredient (API) needs. There is a huge captive API market.
“We need to introspect,” she said. While the argument of global value chain is sound, what is not valid here is the fact that the dependence is just on one or two countries.Published on June 25, 2020