NEW DELHI: Govt may announce a package of measures to boost financial support, including credit, to exporters and small businesses to address a long-standing problem faced by the two crucial segments. The announcement is expected in Budget.
The commerce department has already held discussions with the finance ministry on ensuring that there is adequate credit flow and availability of other instruments, such as factoring and credit guarantee for exporters, who have been complaining about these being a big drag on their competitiveness.
In fact, the department had roped in a consulting firm to look at the issues in detail and based on the recommendations, it was asked by North Block to reassess some of the recommendations.
One of the options being looked at for exporters and MSMEs (micro, small and medium enterprises) alike is collateral free lending to help them tackle the problem of providing security to banks to raise debt. Often small businesses, many of which are family-owned enterprises with little distinction between the personal and business assets, find it difficult to get capital. Exporters have complained that the actual loan flow has been hit hard by banks, which insist on collaterals.
In fact, post Covid-19, the guarantee-based loans extended by banks were seen as a huge help for businesses access capital at reasonable rates, while banks lent freely without fearing about large bad debt.
For exporters, the interest equalisation scheme, which has been pending with the finance ministry for months, may also get the green light, helping Indian traders compete favourably in the international market as high interest burden and logistics costs are seen to be two major handicaps, when it comes to competing with rivals from the region.
Govt believes that small businesses and exporters, particularly those related to manufacturing, can be large employment generators and provide the boost to overall economic activity. The idea is to help them overcome the challenges that they are facing and finance is a key one.
According to the latest RBI data, in the current financial year, loans to micro and small enterprises have grown 4.3%, while those to medium-sized businesses were up 12%. Overall credit growth is to the tune of 6.6%.