Page 45 - Banking Finance August 2020

ARTICLE

and Bankruptcy Code (IBC) court for quicker resolution but Policy Highlights
with the economic activities reduced to nil, it is highly unlikely
Y Increase in borrowing limits: The borrowing limits of
that there will be buyers for stressed assets.
state governments have been increased from 3% to 5%
of Gross State Domestic Product (GSDP) for the year
Among the loan categories, fresh loans given to companies
2020-21. This is estimated to give states extra resources
including those given to small and medium enterprises
of Rs 4.28 lakh crore.
(SMEs) face risk if the cash flows of companies remain under
Y Privatisation of Public Sector Enterprises: A new PSE
pressure, thus impacting their loan repayment ability. Banks
policy has been announced with plans to privatise PSEs,
remain highly risk averse and the consensus among industry
except the ones functioning in certain strategic sectors
leaders is that most companies in consumer-oriented sectors
which will be notified by the government. In strategic
at the moment are now operating with less than 70 percent
sectors, at least one PSE will remain, but private sector
of their capacity. In fact, the banking sector's health depends
will also be allowed. To minimise wasteful administrative
on how soon the economy recovers.
costs, number of enterprises in strategic sectors will
ordinarily be only one to four; others will be privatised/
Solution to the above multi-dimensional merged/ brought under holding companies.
problems?
Financial Highlights
The central Govt. seeing all eyes pinned upon it's multifarious
stimulus package, announced a special economic package Y Collateral free loans for businesses: All businesses
of Rs 20 lakh crore (equivalent to 10% of India's GDP) with (including MSMEs) will be provided with collateral free
the aim of making the country independent against the automatic loans of up to three lakh crore rupees.
MSMEs can borrow up to 20% of their entire
tough competition in the global supply chain and to help in
outstanding credit as on February 29, 2020 from banks
empowering the poor, labourers, migrants, adversely
and Non-Banking Financial Companies (NBFCs).
affected by COVID.
Borrowers with up to Rs 25 crore outstanding and Rs
100 crore turnover will be eligible for such loans and
The table below shows measure components of the entire
can avail the scheme till October 31, 2020. Interest on
special economic package:
the loan will be capped and 100% credit guarantee on
Item Amount principal and interest will be given to banks and NBFCs.
(in Rs crore) Corpus for MSMEs: A fund of funds with a corpus of Rs
Stimulus from earlier measures 1,92,800 10,000 crore has been set up for MSMEs. This will

Stimulus provided by 5,94,550
announcements in Part 1
Stimulus provided by 3,10,000
announcements in Part 2
Stimulus provided by 1,50,000
announcements in Part 3

Stimulus provided by announcements 48,100
in Part 4 and Part 5

Sub Total 1,295,400
RBI Measures (Actual) 8,01,603
Grand Total 20,97,053

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BANKING FINANCE | AUGUST | 2020 | 45