Nirmala Sitharaman to meet Public Sector Bank (PSB) CEOs to tackle MSME Liquidity Crunch. The country’s largest Non- Banking Financial Companies (NBFCs), Infrastructure Leasing and Financial Services (IL&FS) was facing a downturn. By August 2018, they were unable to repay their debt. As a result, MSME faced a crisis as NBFCs constituted the most important avenue of raising funds. Presently, due to delayed payments and higher interest rates, MSMEs are facing additional financial stress. Due to which MSME that accounts for 40% of total exports of the country has encountered difficulties in raising funds.
Nirmala Sitharaman meeting CEOs of PSBs
To increase credit disbursement, Finance Minister Nirmala Sitharaman was all set to meet the heads of public sector banks (PSBs). The purpose of the meeting was to review the steps taken by the government. Further examination required on the credit guarantee scheme for purchase of pooled assets of NBFCs. Moreover, they assessed fund flow to worried NBFC and MSME. It also briefed up on the first phase of ‘outreach program’.
Loan Mela
The first phase of the program was held in 200 districts across the country. Emphasized on lending loans to various sectors, including agriculture, MSME’s, and vehicles. Loans worth Rs 81,781 crore were distributed on a nine-day outreach programme. In addition, the second phase of Loan Mela to happen after Diwali in 209 districts across India.
Overcoming the Liquidity Crunch
Nirmala Sitharaman ensured that efforts are being made to release due payments to MSMEs. As part of restoring liquidity crunch in NBFCs, the government will take part in the Rs 1 trillion scheme. The government is providing partial credit guarantee to state-owned banks. Additionally, Sitharaman has asked officials of banks not to declare stressed assets of MSMEs as non-performing assets (NPA) until March 2020. The center is also reviewing the loan delivery through the ‘psbloansin59minutes’ portal. The country’s largest online lending platform aims to make easy credit access and transparent banking for MSMEs.