Presentation made on the Stimulus measures brought by Indian Government to nagviate the Covid 19 crisis

1. MSME Stimulus Measures
Indian Merchant’s Chamber,
Vashi
R Kannan
Hinduja Group
28th May 2020

2. Introduction
• 30% of nominal GDP (in FY17)
• Share of MSME sector in India’s merchandise exports stood at around 48% in
FY19.
• 6.34 crore unincorporated non-agriculture MSMEs
• provides employment to more than 11.1 crore people.
• 31% MSMEs in manufacturing , 36% in trade , 33% in other services
• 324.88 lakh MSMEs (51.25%) were in rural area and 309 lakh MSMEs (48.75%)
were in the urban area
• The government objective is to increase MSME sector’s contribution to GDP to
50%.
• Loans to MSMEs remained at Rs.17.8 lakh crore by January 2020
• Share of NBFCs at 12.5% of the lending.

3. Government Measures

4. Automatic collateral free loans INR 3,00,000 cr.
• Emergency credit line to businesses / MSMEs from
banks and NBFCs, up to 20% of the outstanding
credit as on 29 February 2020 for working capital
requirement
• Available to units with up to INR 25 cr outstanding
credit and turnover of up to INR 100cr, accounts are
classified as standard.
• It will be a Term Loan at a concessional rate of
interest . The tenure of the loans will be 4 years with
moratorium of 12 months on principal repayment.

5. Credit enhancement
• 100% credit guarantee cover will be given to Banks and
NBFCs .
• No additional collateral or guarantee fees are to be paid.
• Till 31 October 2020.
• This will should enhance ability of banks and NBFCs to lend
• will improve the overall quality of lending .
• The government’s own outgo in the beginning is nil. Only in
the case of default the Government will step in.

6. Subordinated debt INR 20000 cr
• Debt to be facilitated by the government as subordinated
debt.
• Is targeting about two lakh MSMEs which are in stress or
became Non Performing Asset (NPA)
• MSMEs that are stressed / NPAs; Promoters of such MSMEs
will be lent by banks and the loan shall be infused into the
company by promoters as equity.
• Loan by banks. Up to 15% equity in a promoter’s business
subject to a maximum of INR Rs.75 Lakhs.

7. Credit Enhancement
• The government will provide INR 4000 cr
• To the Credit Guarantee Trust for Micro and Small Enterprises
(CGTMSE).
• CGTMSE will provide partial credit guarantee support to banks.
• This will protect MSMEs which show signs of being able to revive
• They are categorised as NPA.
• Measure will also protect jobs and prevent insolvencies
• The lending by banks will have to be more careful and measured, so
that the problem is addressed and not merely postponed.

8. Fund of funds for MSMEs INR 50,000 cr
• Equity funding to MSMEs.
• Fund of Funds (FoF) will be set up
• Corpus of INR 10,000 cr .
• FoF will operate through a holding fund and few subsidiary
funds.
• Leveraging of INR 50,00 cr will be done at the subsidiary fund
level.
• This will promote Public Private Partnership
• It will promote cooperation between various stake holders
and investors.

9. Modification in scope of MSMEs
• To encourage technological up-gradation and modernization
• To achieve better quality and output.
• Capital intensive MSMEs and start-ups will be able to avail benefits under
various government schemes and incentives .
• Will neutralize the inflation effect as the present limit of investment in plant
& machinery for classification of MSMEs was set in 2006.
• The units will be benefited from various government schemes such as
TReDs (a dedicated bill discounting system for MSMEs), CGTMSE, Public
Procurement Policy (i.e., 25% procurement for Central Public Sector
Enterprises (CPSE) is compulsory from MSEs), PSB Loan in 59 minutes
(i.e., a platform to provide in principle sanction of loans to MSMEs).

11. Other Measures
• No global tenders for Government tenders of up to Rs.200 crore.
Will encourage, Make in India, mission.
• Relief to Contractors given by extension of up to six months for
completion of contractual obligations without any penalty and/or
additional cost.
• Relief to Real Estate Projects - the registration and completion date
for all registered projects will be extended up to six months.
• All the dues pending with Government / Government departments
will be paid within 45 days.
• Six months moratorium for Payments to banks / NBFCs.

12. Other Measures
• Minimum threshold to initiate insolvency proceedings raised to Rs. 1 crore
(from Rs. 1 lakh, which largely insulates MSMEs).
• Special insolvency resolution framework for MSMEs under Section 240A of
the Code to be notified soon.
• Suspension of fresh initiation of insolvency proceedings up to one year
depending upon the pandemic situation.
• Empowering Central Government to exclude COVID 19 related debt from
the definition of “default” under the Code for the purpose of triggering
insolvency proceedings.
• Decriminalization of Companies Act violations involving minor technical
and procedural defaults

13. Way Forward
• Focus on Survival and Liquidity.
• Reduce the costs.
• Work closely with the Stake holders.
• Manage the Cash flow well.
• Should study all the Schemes by SMEs.
• Identify the Schemes which will be applicable to your
area of operation.
• Study all the announcements by the new stimulus
measures.
• Make a plan to avail the Schemes and Avail the schemes.

14. Thank you