Page 46 - Banking Finance August 2020

ARTICLE

provide equity funding for MSMEs with growth potential Key Measures Taken by Reserve Bank of
and viability. Rs 50,000 crore is expected to be
leveraged through this fund structure. India:-
The overall financial package that has been announced also
Y Subordinate debt for MSMEs: This scheme aims to
includes the liquidity generated by measures announced by
support stressed MSMEs which have Non-Performing
RBI as under:-
Assets (NPAs). Under it, promoters of MSMEs will be
Y Cash Reserve Ratio (CRR) was reduced which resulted
given debt from banks, which will be infused into the
MSMEs as equity. The government will facilitate Rs in liquidity support of Rs 1,37,000 crore.
20,000 crore of subordinate debt to MSMEs. For this Y Banks' limits for borrowing under the marginal standing
purpose, it will provide Rs 4,000 crore to the Credit facility (MSF) were increased. This allowed banks to avail
Guarantee Fund Trust for Micro and Small Enterprises, additional Rs. 1,37,000 crore of liquidity at reduced MSF
which will provide partial credit guarantee support to rate.
banks providing credit under the scheme. A special Y Total Rs 1,50,050 crore of Targeted Long Term Repo
insolvency resolution framework for MSMEs under the Operations (TLTRO) has been provided for investment
Insolvency and Bankruptcy Code, 2016 will be notified. in investment grade bonds, commercial paper, non-
Y Schemes for NBFCs: A Special Liquidity Scheme was convertible debentures including those of NBFCs and
announced under which Rs 30,000 crore of investment MFIs.
will be made by the government in both primary and Y Special Liquidity Facility (SLF) of Rs 50,000 crore was
secondary market transactions in investment grade announced for mutual funds to provide liquidity support.
debt paper of Non-Banking Financial Companies/Housing
Y Special refinance facilities worth Rs 50,000 crore were
Finance Companies/Micro Finance Institutions. The announced for NABARD, SIDBI and NHB at policy repo
central government will provide 100% guarantee for
rate.
these securities. The existing Partial Credit Guarantee
Scheme (PCGS) will be extended to partially safeguard Y A moratorium of three months has been provided on
NBFCs against borrowings of such entities (such as payment of installments and interest on working capital
primary issuance of bonds or commercial papers liability facilities for all types of loans.
side of balance sheets). The first 20% of loss will be
borne by the central government. The PCGS scheme To sum up, considering the heterogeneity of problem every
will facilitate liquidity worth Rs 45,000 crores for NBFCs. sector or industries are facing, the Indian economy will take
time to adjust to new normal. Moreover, measures taken
Y Employee Provident Fund (EPF): Under the PM Garib
to move the economy forward would take time to unfold
Kalyan Yojana, in addition to providing almost free ration
fully. Their impact can be witnessed after a certain period
to the downtrodden classes, paid 12% of employer and of time when the actual implementation of measures and
12% of employee contribution into the EPF accounts of
policy reforms has been performed.
eligible establishments for the months of March, April
and May. This will be continued for three more months We definitely have to keep moving forward but also need
(June, July and August). This is estimated to provide
to be patient as any steps taken in a haste might not give
liquidity relief of Rs 2,500 crore to businesses and
us the expected result due to uncertainty prevailing in the
workers. economy. Therefore, currently while focusing on sustaining
Y Street vendors: A special scheme has been launched through this crisis, the need of the hour is that all our policy
to facilitate easy access to credit for street vendors. makers and stakeholders make concerted and honest efforts
Under which, with a view to generate liquidity of Rs towards reviving the economy.
5,000 crore, bank credit has been provided to each
vendor for an initial working capital of up to Rs 10,000. References:
The package is beautifully presented as under:- blog.mygov.in
Pradhanmantri.info Pradhanmantri.info

46 | 2020 | AUGUST | BANKING FINANCE