In addition, more funding for Mudra loans, meant for tiny businesses, are on the anvil, government sources told TOI.
The finance ministry has floated a proposal for the cabinet to guarantee fresh working capital limits to small units through the National Credit Guarantee Trustee Company so that small businesses are not starved of working capital. Currently, bank exposure to over six crore micro, small and medium enterprises (MSMEs) is estimated around Rs 15 lakh crore, sources said.
On Tuesday, the finance ministry said that between March 20 and May 8, state-run lenders contacted 97% of borrowers eligible for emergency credit lines and working capital enhancements and sanctioned loans to the tune of Rs 65,879 crore. But the funding is seen to be inadequate even to pay salaries and other dues given that sales have come to a halt and payments are overdue from large businesses and government departments, something that will be pushed by the finance and MSME ministries once again.
Additional working capital is expected to help banks lend more to provide funds to MSMEs amid expectations that the finance ministry will prod the Reserve Bank of India to extend the loan moratorium beyond the current three-month period so that businesses don’t come under pressure to repay dues at a time when liquidity is already tight in absence of sales.
Apart from helping them tide over the immediate cash crunch, an announcement on a new definition for MSME is also expected to enable them to scale up. Besides, there are indications that government contracts up to a specified value will be given to Indian businesses. In addition, the mandatory procurement from micro and small businesses is expected to be tightly monitored.