Standby Line of Credit for MSMEs
Public Sector Banks (PSBs) have sanctioned over 11.68 lakh Repo-linked loans to retail borrowers for home, vehicle, education and personal loans and to micro and small enterprises, amounting to Rs.1.32 lakh crore post Finance Minister’s announcements on 23 Aug 2019 on measures to boost the economy.
All PSBs have introduced checkbox-based OTS and have sanctioned settlements under OTS in over 5.26 lakh accounts amounting to Rs.16,716 crore, following the Ministerial announcements, said the Finance Ministry in a release on 28 Dec 2019.
In order to address the working capital needs of MSMEs on account of stress arising from delayed payments, PSBs are offering up to 25% enhancement in working capital limits for standard MSME accounts as a Standby Line of Credit.
The banks have also launched a MSME Outreach Initiative for restructuring of stressed standard assets as needed on priority and in a timely manner, besides providing new term loans, payment solutions for delayed receivables, bill discounting and trade finance.
A total of 538,440 MSME loan accounts have been restructured in terms of RBI’s circular dated 1 Jan 2019, out of which 165,104 accounts have been restructured since October 2019.
On 11 Dec 2019, the Cabinet has approved the recently launched Partial Credit Guarantee Scheme (PCGS) that would now cover NBFCs/HFCs which may have slipped into SMA-0 (up to 30 days overdue due to stressed accounts) category during the one-year period prior to 1 Aug 2018 and asset pools rated BBB+ or higher.
The Government has already approved issuance of guarantee for buy-outs of NBFC asset pools worth Rs.4,294 crore from 10 NBFCs/HFCs covering a wide spectrum of entities.
Post IL&FS default, aided significantly by Government support, assets of NBFCs have grown by 12.83% from Rs.28.31 lakh crore to Rs.31.94 lakh crore while assets of the 211 larger NBFCs with 81% of market share have grown at an even higher rate of 19.69%.
Bank exposure to NBFCs has grown at a much higher rate of 17.46% as compared to market financing.
Similarly, 76 out of 101 HFCs with 82% of market share have shown a positive asset growth of 18% post IL&FS default from Rs.8.45 lakh crore to Rs.10 lakh crore.
Exposure of banks and NHB to the 76 performing HFCs has grown by 38% post IL&FS default, as compared to 14% growth in market financing to these HFCs, said the Ministry following a banking review by Finance Minister Nirmala Sitharaman on 28 Dec 2019.
Thus, the NBFC/HFC sector post IL&FS default, is now stabilizing and good NBFCs/HFCs are able to raise funds from market even at times at rates less than the pre-IL&FS rates.
The market is, however, distinguishing between good and not-so-good entities which is reflected in the better entities being able to obtain higher financing from both banks and the market, said the Ministry. fiinews.com
