5.

Limitations in package implementation, way forward

** Meets hygiene need of capital- Availability of capital may solve supply side
bottlenecks for survival of SMEs, but demand-driven uptake for business expansion will
be low

** Asset quality problems for the financial system- As per Moody’s- slowdown in
India’s growth, the more the MSMEs will face liquidity stress, leading to asset quality
problems for the financial system

** Support to NBFCs & MFIs is inadequate- it is less than 2% of their outstanding debt.
Thus, it’s feared that small lenders will be left in the lurch

** Unwillingness of banks- Both RBI and Govt are providing liquidity/ refinance to
NBFCs with 1.25 LCR. But banks are hesitant to increase exposure to NBFCs. “Pandemic
Blues” has made the Banks more risk-averse.

** Way forward-
1. Restructure liquidity scheme for NBFCs- as proposed by Finance Industry
Development Council (FIDC), an industry body representing non-banking financial
companies (NBFCs). It will improve long term funding for them up to 3 yrs.
2. Avoid Risk aversion- Extreme cautiousness in retail segment has become so
dominant that banks are now sitting on huge amounts of cash. (e.g. SBI posted a
liquidity ratio of 143% in contrast to the 80% normal)
Prime Minister’s statement- Even in case of MSMEs, old yard stick to assess credit
worthiness should be augmented with fintech to ensure better credit penetration, low
costs and lesser frauds.