Measures under Atmanirbhar Bharat Abhiyan

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May 14, 2020

Why in news?

The Minister of Finance made a set of announcements under the Atmanirbhar Bharat Abhiyan (Atmanirbhar meaning self-reliant).

What are the welcome measures?

  • The measures announced will go a long way in lifting the spirits of the two key and troubled sectors:
  1. micro, small and medium enterprises (MSMEs)
  2. non-banking finance companies (NBFCs)
  • While for the former, it is an existential crisis, for the latter, it is a liquidity issue.
  • MSMEs - The massive Rs. 3-lakh crore collateral-free assistance handed out to MSMEs will help them revive their operations.
  • Extending a sovereign credit guarantee for the complete amount is a welcome move.
  • This is because banks may otherwise have been reluctant to support troubled borrowers.
  • Two of the feature that would help boost the equity portion on MSME finances are:
    1. the Rs. 20,000 crore partially guaranteed subordinated debt programme
    2. the Rs. 50,000 crore fund of funds scheme
  • NBFCs - NBFCs, housing finance firms and micro finance entities got a much-required liquidity boost.
  • A Rs. 30,000 crore scheme is announced wherein their debt paper will be fully guaranteed by the government.
  • This works along with the partial credit guarantee scheme of Rs. 45,000 crore.
  • With these, the government has broken the logjam wherein banks were unwilling to extend credit despite the RBI’s strong push.
  • This will largely address the liquidity crisis in the non-banking space for now.
  • DISCOMS - The liquidity issues of power distribution companies were addressed through a Rs. 90,000 crore infusion.
  • This will be securitised on their receivables and backed by a State government guarantee.

What are the shortfalls?

  • The finer details of the debt programme and the funds scheme for MSMEs should be more clear.
  • The government could have specified the interest cap on the loans without leaving it to individual lenders.
  • Now each of them has its own rate structure.
  • Again, the scheme could have been extended until the end of this financial year instead of until October 31, 2020.

What is the overall objective?

  • The announcements are focused on the liquidity part of the crisis.
  • The reality is that the government will be called upon to bear the liability of these big numbers only if the economic situation becomes hopeless.
  • But, hopefully, it may not come to that point.
  • So, the announcements have in effect addressed the issue of lack of confidence in the credit market.
  • Notably, liquidity was always there but only for the most credit-worthy of borrowers.
  • The government has now just given the assurance to lenders and borrowers that it is willing to support their commitments.
  • This is the signal that MSMEs and their lenders needed and so, overall, the measures are welcoming.


Source: The Hindu

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