Centre mulls over proposal to guarantee $39 billion of small-business loans: Reports
India is slowly coming out with programmes amid the coronavirus lockdown. Among these programmes is a proposal to help small businesses that are the hardest hit
New Delhi: According to a report in Bloomberg, India is considering a proposal to guarantee as much as 3 trillion rupees ($39 billion) of bank loans to small businesses as part of a plan to restart Asia’s third-largest economy reeling under the impact of a 40-day lockdown, people with knowledge of the matter said.
Under the proposal, small businesses will be eligible for an additional 20% of their outstanding credit limit, which will be fully backed by Prime Minister Narendra Modi’s administration, the people said, asking not to be identified as the discussions are private. The loans will be extended by banks, financial institutions and shadow lenders, the people said. The government will set up a special funds to pay for any defaults, the people said.
India’s government and regulators are slowly coming out with programs as everyone from companies to fund managers struggle under the world’s biggest stay-at-home restrictions, which has halted manufacturing and wiped out consumption.
With the economy set to contract for the first time in four decades, Modi’s endorsement is the only way to make it attractive for banks, which are concerned about rising delinquencies, to lend to small businesses.
A finance ministry spokesman was not immediately available for a comment.
Earlier on Monday, the Reserve Bank of India (RBI) offered Rs 50,000 crore credit line to mutual funds to avoid distress sale of assets and calm investor concerns after Franklin Templeton shut six of them last week citing a lack of liquidity.