The Correspondent Bureau: Finance Minister Nirmala Sitharaman mega announcement to infuse Rs 3 lakh crore in the MSME sector is likely to turn out be a robust plan with not many takers due to the limited time frame to avail the collateral-less loan, stringent banking procedures and government clearances and the pandemic conditions prevailing in the country. Prime Minister Narendra Mod, while announcing Rs 20 lakh crore grandiose package, said that the virus situation is going to last longer than expected and people should be ready to brace the hardships for a long duration. Modi meant that the lockdown and current threat perceptions were not likely to be lowered down anytime soon and lockdown conditions could possibly go on the middle of the year, or till a cure or vaccine is found to kill the Covid 19 virus.
The government is expected continue the lockdown conditions albeit not so stringent in nature as was witnessed in March and April. Full train services are unlikely to commence before July 1. The government has not opened up the air sector fully and roads are also not fully opened for free inter-state travel. NEET and JEE exams have been shifted to end of July and beginning of August. “It means that the government is prepared that this situation may go till July,” remarked an industrialist.
The Finance Minister has set a deadline of October 31, 2020 to secure these collateral free loans. “The situation is fluid. Anyone will make further Investment when they will see a bright side. Only then the existing players will pick up loan. Given the present condition, it is unlikely anyone would go in for expansion. However, some enterprises may avail the loan facility for running their businesses,” said MSME entrepreneur, Ved Prakash Tewari from Kotputli in Rajasthan.
However, bank officials are apprehensive that giving collateral free loans would hike up the non-performing assets. Currently, the banks are struggling with NPAs to the tune of Rs 10 lakh crore. “Collateral free loans are an invitation to the industries to turn their loans into NPAs,” remarked a banking official on condition of anonymity.
However, the government did not issue guidelines to the banks backing the announcement by the finance minister on Thursday. To avail loans from banks, it could take anytime from a month to six months, depending on the objections and paper works the banks require. For a loan of Rs 1 crore, a businessman was given a hell of a time by the bank. The paper work and documents required by the banks is demanding. “And now that the government is giving a guarantee, the loan application may be required to be cleared by the state or local babus, which could be another clog in the wheel,” observed a businessman.
The stock market plunged as the government stimulus failed to excite the investors. The sensex plunged 886 points. Banking and IT stocks fell the most on Thursday indicating that the investors were not enthused by Nirmala Sitharaman’s Rs 3 lakh crore backing offer to the MSMEs. Modi has announced Rs 20 lakh crore package on Tuesday.