With a sizable number of MSMEs failing to repay debts, the sector has requested the government to implement a non-performing asset (NPA) amnesty programme and a guarantee cover of 100 percent of extra collateral required for bank loan restructuring.
In the midst of a devastating epidemic, it is predicted that many loan accounts became NPA even with prolonged NPA categorization from 90 days to 180 days. With the MSME sector being one of the most hit by the interruption, a big number of businesses are still attempting to get back on their feet with government assistance.
“We have suggested an amnesty scheme for NPAs up to Rs 25 crore. We are asking only about writing off penal interest and penalties. The government can come up with a one-time scheme that will benefit lakhs of firms. Assuming that even 2 lakh firms are enabled to resume operations by paying outstanding principal, at least 20 lakh people would get jobs,” Vinod Kumar, President, India SME Forum told as per reports.
To help the industry, the government announced Rs 3 lakh crores in collateral-free automatic loans for MSMEs. The total guarantee provided by the Emergency Credit Line Guarantee Scheme (ECLGS) was eventually increased to Rs 4.5 lakh crore.
However, considering the MSMEs’ precarious financial state, the assistance looked insufficient. As a result, the risk of non-performing assets (NPA) in the industry has been elevated.
To assist vulnerable enterprises, the Federation of Indian Micro, Small and Medium Enterprises (FISME), a leading industry association, has proposed that a guarantee cover of 100 percent of additional security required for loan restructuring be extended through the existing Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme.
