Another stimulus package from Modi government soon for coronavirus-hit economy? May come soon!

It seems Modi government has made up its mind to roll-out another stimulus package for coronavirus-hit economy. Currently, banks are offering an extra line of credit of 10 per cent based on working capital limits, which the government intends to increase further. According to a report in news agency PTI, as part of a stimulus package for the coronavirus-hit economy, the government is working on a credit guarantee scheme to enable banks to provide additional 10-15 per cent working capital to MSMEs for payment of wages.

Since units are closed due to lockdown and there has been no operation for the past two months, most micro, small and medium enterprises (MSMEs) do not have money for paying wages and financial assistance for them is under consideration of the government. One of the proposals under consideration is to provide 10-15 per cent additional line of credit by banks over the working capital limit of the MSME sector, which is the largest employer in the country after agriculture.

This loan, especially for wage payment, will be backed by a proposed credit guarantee fund so that lenders' money is secured in case of default by any borrower. The MSME sector contributes over 28 per cent of the GDP and more than 40 per cent of exports, while creating employment for about 11 crore people.

Public sector banks have sanctioned loans worth Rs 42,000 crore to the MSME sector and corporates since the start of the lockdown under the COVID-19 Emergency Credit Facility to provide liquidity for survival.

With the lockdown coming into effect from March 25, state-owned banks opened COVID-19 Emergency Credit Facility under which 10 per cent top-up loan is given over their working capital limit, subject to a maximum of Rs 200 crore. Till now, the banks have sanctioned Rs 27,426 crore worth loans to MSMEs, as per data collated by the government.