The Financial Industry Development Council (FIDC) wrote to Nitin Gadkari, Minister of Micro, Small and Medium Enterprises (MSMEs) on Saturday to call for measures to improve liquidity support for small and medium non-bank financial enterprises. (NBFC) for on-lending to MSMEs.
In its letter, the industry body called on the government to include wholesale and retail trade in the list of activities allowed for MSME registration and also to make consequential changes to the Udyam portal.
Regarding the credit guarantee fund program for NBFCs, the IFCD has requested the government that all applications filed in fiscal year 21 (especially from March 24, 2021 to March 31, 2021) but not processed, be treated as requests for FY 21 as a one-time exception.
According to the Credit Guarantee Fund Scheme for NBFCs, which states that in order to file a claim under the CGS Scheme, the account must have been classified as NPA according to RBI standards (the installment has been past due for a period of three months or more) and the account must have fulfilled the 12 month downtime requirement, post portfolio crystallization.
The letter written by Mahesh Thakkar, Managing Director of the IFCD, recommended that the interest subsidy program be revived and extended to both MSMEs and retail and wholesale traders. In the absence of notification from the MSME Department and RBI, the Interest Subsidy Program cannot be used by the NBFC industry to support and extend credit to its MSME clients.
After the government reduced the guarantee coverage from 75% to 50%, the IFCD requested the withdrawal of the changes to the CGS-II regime with effect from April 1, 2021. It said the cap should be restored to 3 times until normal business operations of MSMEs are restored.
First publication: STI