Finance Minister, Nirmala Sitharaman makes MSMEs priority sector to encourage these enterprises to achieve their fullest potential. MSMEs contribute 29% to India’s GDP and employs about 60% of the Indian population. She has announced various schemes and measures to boost the growth of the struggling MSMEs.
Clearing GST Refunds and Government Overdues
In an attempt to curb the credit flow problems caused by delayed GST refunds, on 23rd August 2019 the finance minister announced that “all pending GST refunds will be paid within 30 days. To ensure regulation in future, GST refunds to be paid within 60 days from the date of applications.”
The minister also stressed that the outstanding dues of MSMEs for the supply of goods and services should be cleared. To accelerate the process of clearing overdue, she announced 15th October as the deadline for central PSUs to clear overdue payments.
Government asked PSUs to hold loan mela or shamiyana melas in 400 districts in India. To recognize potential lenders and the NBFCs to whom PSU could directly give credit. The melas aimed to foster lending to retail, agricultural and MSMEs sector.
During the nine-day Loan Mela program PSUs distributed loans worth Rs 81,781 crore. This initiative started on 1st October 2019 turned out to be a success for the government.
Big Corporates to Clear dues of 40,000 crore
According to reports, big corporates owe MSMEs about INR 40,000 crores. The government has decided to intervene the matter to ensure that dues are paid to MSMEs soon. On 14th October, Ms. Sitaraman said that the government will ask big corporates to expedite clearing dues worth Rs40,000 crore to MSMEs.
She said, “The corporate affairs ministry has a complete list of companies that owe MSMEs nearly Rs 40,000 crore.” Government set to take a prolonged approach to get due cleared by the end of this month.
Bill Discounting Facility to Increase Liquidity
To increase the liquidity, the finance ministry has proposed bill discounting to MSMEs against their dues. This facility will help MSMEs to receive credit from banks based on the bills produced by them.
Finance Secretary, Rajiv Kumar said that PSBs are requested to reach out to MSMEs to provide bill discounting to them against their dues.
The finance ministry has asked banks to submit the list of MSMEs who wish to avail the bill discounting facility by October 22.
To increase liquidity and encourage NBFCs the government will provide one-time partial credit guarantee to PSBs for the first loss of up to 10% for purchase of high-rate pooled assets of NBFCs. In addition, total high-rated pooled assets of NBFCs are worth Rs 1 trillion.
No MSME stressed loan to be declared NPA
In a major relief to the stressed MSMEs, Nirmala Sitharaman announced that no stressed asset MSMEs would be declared a Non-Performing Asset (NPA) till 31st March, 2020. She also asked state owned banks to help MSMEs in clearing debt.