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MSMEs to Receive Emergency Loan Amidst COVID-19

Apr 22, 2020

A webinar on ‘Revitalising Trade and Industry battered by COVID-19 with a focus on MSMEs’ was organised by MVIRDC World Trade Center Mumbai on April 22, 2020. Mr. Suresh Nair, DGM-SME and Financial Inclusion, State Bank of India said, “State Bank of India (SBI), aims to lend INR 700 crore to micro, small and medium enterprises (MSMEs) in Mumbai circle covering four districts namely Thane, Palghar and Raigad including Mumbai by end June 2020 to tide over liquidity crisis amidst COVID-19 lockdown. This will boost flow of credit to MSMEs by reassessing their working capital limit and also by extending COVID emergency loan. Among all the scheduled commercial banks in the country, SBI has a market share of 22% in the MSME lending segment.

Mr. Nair further informed that the COVID-19 crisis will not lead to a sudden spurt in non-performing assets (NPAs) as Reserve Bank of India has provided moratorium on all loan repayment schedule for the industry. The impact of this crisis on NPA situation will be clear after August 2020 depending on the evolving situation, Mr. Nair informed.

Mr. Nair pointed out that SBI has provided sanction letter for additional loan facility to 67% of all eligible borrowers. However, only 50% of these borrowers could avail of this facility because of practical difficulties in executing documentation.

Mr. Kailashkumar Varodia, CFO, Receivables Exchange of India Ltd also addressed the webinar and suggested MSMEs to avail of invoice financing provided by the company’s electronic receivable discounting platform. Mr. Varodia said, “The platform is an online bill discounting platform that offers low-cost financing with recourse to multiple financiers registered on it. It is also an alternative channel of working capital where MSMEs can avail of funding without executing documentation with financiers. The platform was mainly to cater to MSMEs supplying to PSUs, bring about more transparency and digital invoicing procedures. RXIL can help MSMEs ease their liquidity constraints even during the lockdown as the entire registration and financing process is conducted online. In current COVID-19 crisis, MSMEs can discount their receivables at 6.6 per cent on the RXIL platform.

Mr. Bhagwan Chandnani, AGM, Small Industries Development Bank of India (SIDBI) shared information about the measures taken by his organisation to support MSMEs in the current crisis. He said, “SIDBI offers loans to MSMEs in the form of products and solutions for combating COVID-19. One such is SIDBI Assistance to Facilitate Emergency (SAFE) where 100 per cent funding at five percent interest rate is offered to MSMEs within 48 hours of application without collateral, manufacturing products and providing services related to fighting Coronavirus such as masks, ventilators, testing labs, etc. The other is SIDBI Assistance to Facilitate Emergency Response against Coronavirus – Plus (SAFE Plus) which offers loans at five percent to MSMEs supplying above-mentioned manufactured products to governments. The third product is SIDBI Make in India Soft loan fund for Micro Small and Medium Enterprises (SMILE) where a loan is given at six per cent interest rate for capital investment in hospitals, testing labs and healthcare firms.

Mr. Vijay Kalantri, Vice Chairman, MVIRDC World Trade Center Mumbai said, “RBI has provided a package but its implementation by banks has only been in letter and spirit, however the difficulty lies in its transmission and implementation to industry. Public sector banks such as SIDBI and SBI will have to play a major role in helping them to get back on track. MSMEs produce more than 8000 products and they play an important role in Make in India programme. Therefore, a lot more needs to be done as they are the backbone of the Indian economy.”