Views of Mr. R.K.Gurumurthy, Head – Treasury, Lakshmi Vilas Bank on the FM announcement today

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“Following a massive economic relief package announcement by the Prime Minister last night, the Finance Minister announced the first tranche of economic package that aims predominantly to address the economic woes faced by MSMEs and NBFCs.

The Government is firing on all cylinders. Today’s package is worth INR 6 Trillion and aims to infuse INR 3 Trillion collateral-free automatic loan facility with 100% credit guarantee to Banks and NBFCs for onlending to standard MSMEs. The scheme is available until 31st October 2020. The loans will carry lower rates of interest and comes on top of a re-definition of MSMEs for the purpose of incentivising growth and eligibility to borrow. The package also envisages infusion of Rs 30,000 Cr special liquidity for investments to be made in primary and secondary markets in investment grade debt instruments issued by NBFCs/HFCs and MFIs, which will be fully guaranteed by the Government of India.  Additonal 45,000 cr support is also provided with a partial guarantee scheme for investments in AA or even unrated bonds, with a first loan loss of 20% to be borne by the government.

Today’s package,  the first in various tranches, will go a long way in resuscitating a section of the smaller and medium sectors of manufacturers that have been devastatingly affected by COVID-19 pandemic. These measures will also provide a strong base for the Make In India or the Aatmanirbhar initiatives.”

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