MSMEs with stressed A/cs to get a lifeline, too

MUMBAI: The special package for micro, small and medium enterprises (MSMEs) will also include accounts that are stressed or are on the verge of being declared non-performing, throwing a lifeline to these companies.

Details of the scheme are still being worked out with the Small Industries Development Bank of India (SIDBI), which is likely to be the nodal agency for the implementation. But bankers said loans will be offered to all companies irrespective of their repayment history.

"All SMA 0 to SMA 2 accounts, which are considered as standard in banking parlance, will qualify without any restriction. For MSMEs, which have already been declared as NPAs, the Rs 20,000 crore fund will be used from which they can borrow and infuse capital into their companies. The only qualification is that the units have to be in production and there should not be an frauds or such things," said Indian Banks' Association (IBA) CEO Sunil Mehta.

On Wednesday, finance minister Nirmala Sitharaman announced that Rs 3 lakh crore of collateral-free loans will be offered to MSMEs for up to 20% of their loan outstanding at the end of February.

Borrowers with up to Rs 25 crore outstanding loans and Rs 100 crore turnover will be eligible for a four-year loan with a moratorium of 12 months on principal repayment.

The government will provide 100% credit guarantee to banks and NBFCs on principal and interest. The scheme can be availed until October 31 and MSMEs will not be required to offer any fresh collateral.

SMA or special mention accounts are ones where the interest payment is delayed. It is classified as SMA 0 for delays from 0 to 30 days, SMA 1 for 31 to 60 days and SMA 2 from 61 to 90 days. Payments not made beyond 90 days are classified as NPAs.

For such NPA accounts, there is another Rs 20,000 crore package through which promoters of stressed MSMEs can infuse equity into their companies.

The government will provide a support of Rs 4,000 crore to the SIDBI-managed Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which in turn will provide credit guarantee support to banks. Bankers said 75% of the fund infusion for this scheme will be through term loans from banks while 25% of the funds will be provided by the government through CGTMSE.

"The second scheme is specially for NPA accounts which have producing units but need capital for survival. These sick units can tap both the Rs 20,000 crore fund for capital and also the Rs 3 lakh crore in concessional loans. The debt taken through the Rs 20,000 crore scheme will be treated as subordinated debt and hence will be paid back only after the bank loans are paid," Mehta said.

An ongoing Reserve Bank of India (RBI)-approved restructuring scheme for MSMEs will also be used to help these companies. The scheme started in 2019 is extended to companies with outstanding loans of Rs 25 crore and is valid till December 2020.

The interest rate on the Rs 3 lakh crore scheme is still unclear. But bankers said it could be in the 8% to 9% range.

"We are still awaiting the final guidelines on these loans. There could be some exclusions of MSMEs according to RBI norms but that is not clear as of now. Currently, many banks are giving 10% over and above the outstanding loans of MSMEs at 8% or just above. This rate could also be in that range," said a CEO of a public sector bank.

However, some analysts have cautioned about the deterioration in credit culture as banks totally disregard risk because of the government guarantee.

"The risk of credit culture deteriorating will remain monitorable, as bankers would have no skin in the game and hence adhoc disbursement may increase risk. GNPAs in the MSME segment in FY21 may be lower than earlier anticipated but will run a risk of rising post moratoriums," said Isha Chaudhary, director at Crisil Research.