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‘Moratorium period to help businesses protect CIBIL score’

Shishir Sinha New Delhi | Updated on June 29, 2021

Minister of State for Finance Anurag Singh Thakur expressed hope that the various features of the guaranteed loan scheme will not affect the credit history of businesses.

In an interview to BusinessLine, he said that direct cash mechanism is also getting bigger and bigger. Excerpts:

Relief measures have more credit elements. Is it good especially when there is so much uncertainty and businesses are under stress?

We have consistently expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) and ensured flow of credit across all businesses. Businesses can get fresh working capital and liquidity without any additional collateral and guarantee fee. This, in a way takes away the ‘stress’ of ‘businesses under stress’, induces confidence building and trust between the government and businesses.

This scheme was expanded based on the feedback received from industry to include additional sectors such as travel and tourism, hospitality, health, sports, civil aviation, which needed additional support. Since the launch of this scheme, more than ₹2.72-lakh crore has been sanctioned to around 1.10 crore borrowers. Out of this, guarantees for ₹1.64-lakh crore have been issued to 1.04 crore MSME borrowers, which is close to 95 per cent of the total borrowers.

Under the guaranteed loan scheme, banks will not suffer in case of default, but the CIBIL record of the borrower will be affected. So, such businesses will face a problem in getting loan in future. What do you have to say?

The credit guarantee schemes ensure timely flow of credit to the borrowers even in a stressed economic scenario when the risk perception may be higher. By providing collateral free credit flow to the business, the government is showing trust and it is for the business to ensure timely repayment by maintaining a healthy CIBIL score.

Additionally, we have provided sufficient moratorium periods in the credit guarantees schemes. Since no principal repayment demand gets generated during the period, there is no case of repayment default and deterioration of CIBIL score. In addition to this, you may recall that during the first national lockdown, through our request, the RBI had said that rescheduling of payments will not classify as default and the credit information companies were asked to ensure that such actions do not impact the credit history of the beneficiaries.

Why can’t the government opt for more direct cash assistance rather than credit?

Various central schemes for women, farmers, construction workers, widows, labourers powered by the JAM trinity have provided direct bank transfers in 42 crore Jan Dhan accounts; is this not ‘cash in hand’ to the poor and underprivileged?

In the past 5 years, we have spent close to ₹8-lakh crore on procuring wheat and paddy, which has been supported by direct cash transfers. We have announced record procurement of wheat in the rabi marketing season and ₹85,413 crore has been paid to farmers. The fertiliser subsidy announced is also being sent directly to the bank accounts of the beneficiaries. Through the PM-Kisan Yojana, in May, we disbursed ₹18,253 crore to 9 crore farmers directly to their bank accounts.

Out of 17 measures announced on Monday, which is most important and why?

Every single measure announced is important; it will have a multiplier effect on other sectors in the short and long term. After due deliberations with trade associations, we announced specific measures for the travel & tourism and health sectors. Some announcements will have an immediate impact. The support for the health sector of ₹ 50,000 crore is aimed at upscaling the medical infrastructure, specifically targeting underserved areas. The medical sector can take the benefit of this fresh liquidity support. Similarly, we announced ₹23,220 crore more for public health that is being added to the Ministry’s budget, which is focused on short-term emergency preparedness with special focus on children & paediatric care and beds.

What is your overall assessment of the economy?

The economy is structurally sound; we believe in the resilience of our workforce and entrepreneurial ability of our businesses. Due to the second wave, most of the states were either under a full or partial lockdown. But as the second wave recedes, unlocking of the economy is taking place at a very rapid pace and the indicators suggest a quick recovery of the lost momentum. Traffic data on national highways jumped close to 35 per cent in June which can be corroborated by the rise in the e-way bills generation this month. The demand for power surged by 7.8 per cent week on week.

The GST collection for eight consecutive months has been over ₹1 lakh. In the first quarter of FY22, direct tax collection rose 66 per cent year-on-year and we achieved close to 15 per cent of the total budget estimates. My confidence also stems from the massive and rapid pace of the vaccination programme that is underway; we are the first globally with 33-crore citizens having been vaccinated. Long-term measures such as PLI Scheme, reduction in the tax rate for manufacturing companies, export-boosting measures etc. will spur growth in the economy and we will recover the lost growth sooner than expected.

Published on June 29, 2021

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