NEW DELHI: Finance Minister Nirmala Sitharaman on Friday made it clear that banks could not refuse credit to micro, small and medium enterprises (MSME)under the emergency credit line announced by the Government and stressed that such refusals should be reported.
Sitharaman, who was speaking at a meeting with industry captains organised by industry chamber FICCI, also said that her ministry was working with the Reserve Bank of India (RBI) on extending the moratorium on loan repayments and restructuring borrowings.
“Banks cannot refuse credit to MSMEs covered under emergency credit facility. If refused, such instances must be reported. I will look into it,” the finance minister said. Officials separately added that the government was mulling raising the limit for loan sanctions under the Rs 3 lakh crore credit guarantee scheme which is supposed to dole out collateral-free loans.
However, as of July 23, 2020, the total amount sanctioned under the scheme by public sector and private banks stood at Rs 1.3 lakh crore, out of which some Rs 82,000 crore have been actually disbursed. Industrialists have been complaining that banks have delayed sanctions and, in some cases, refused loans under the scheme altogether.
Meanwhile, the minister also said she was working with RBI on the need to restructure loans due to the adverse impact of Covid on industrial activity. Soon after the lockdown was announced, the central bank had allowed borrowers to put back loan repayments by 3 months and then extended it by another 3 months.
Industry chambers have since been clamouring for another extension of this moratorium up to December- end, as well as restructuring loans. But several top bankers including Deepak Parekh of HDFC, Uday Kotak of Kotak Mahindra and SBI chairman Rajnish Kumar have spoken out against extensions. The RBI, in its fiscal stability report released recently, has already warned that India’s banks may see gross bad loans burgeoning to a two decade high of 12.5 per cent by March-end 2020.
Moratorium extension on the anvil
Finance Minister Nirmala Sitharaman said that her ministry was working with the Reserve Bank of India on extending the moratorium on loan repayments and restructuring borrowings. Soon after the lockdown was announced, RBI had allowed borrowers to put back loan repayments by 3 months and then extended it by another 3 months.