Following up on the PM’s speech on May 12, 2020, India’s Finance Minister announced certain benefits for micro, small and medium enterprises (MSMEs):
- Collateral free loans of up to 20% of the outstanding credit as on February 29, 2020, to be extended up to an aggregate amount of INR 3 trillion (US$39.8 billion).
- Subordinate debt of up to INR 200 billion (US$2.65 billion) for non-performing and stressed MSMEs.
- Creation of “Fund of Funds” of INR 500 billion for investment in viable SMEs.
- Definition of MSMEs rejigged to include more businesses in both, the manufacturing and services sectors.
These reforms will allow some MSMEs to remain liquid during the Covid19 crisis. However, no cash pay-outs have been announced, and any lending or equity infusion will come at a cost to the MSME eventually.