Finance minister Nirmala Sitharaman, on Friday, shot off a warning to banks over alleged resistance to offering loans to MSMEs under the emergency credit guarantee scheme announced by the government to ease liquidity pressure on micro, small and medium enterprises due to economic stress induced by the coronavirus pandemic and the subsequent lockdown.
Sitharaman promised to look into any instances of banks refusing credit after listening to concerns raised by prominent industry body FICCI (federation of Indian chambers of commerce and industry) highlighting the problems being faced by MSMEs in accessing loans under the scheme.
“Banks cannot refuse credit to MSMEs covered under emergency credit facility. If refused, such instances must be reported. I will look into it,” she said.
Sitharaman’s statement follows Prime Minister Narendra Modi’s appeal on Wednesday to bankers to fund bankable projects and MSMEs without fear. He promised that the government will back their decisions.
Addressing another major area of concern, the finance minister said that the government is working with the RBI (Reserve Bank of India) for restructuring of loans due to the Covid-19 impact on businesses. This is one of the key demands made by the industry bodies.
“The focus is on restructuring. Finance ministry is actively engaged with RBI on this. In principle, the idea that there may be a restructuring required, is well taken,” she said admitting there was a need to consider restructuring in the present circumstances.
On a related issue, Sitharaman said that her ministry is working with RBI on the demand of the hospitality sector for extension of moratorium, or restructuring. Hospitality sector is one of the worst hit during the current crisis and the finance minister said she “fully understand the requirements of the hospitality sector on extension of the moratorium, or restructuring”.
The important interventions were announced by the finance minister during FICCI’s national executive committee meeting.
She also confirmed that work is going on creating a development finance institution to deal with the emerging credit requirements of the industry.
“What shape it will take, we will know shortly,” Sitharaman said.
On the issue of reduction in GST rates on the healthcare and other products, she said this fell in the domain of the GST council.