Government contemplates over the proposal to guarantee Rs 3 lakh crore of small business loans

According to a report by Bloomberg, the government is considering a proposal of guaranteeing worth Rs. 3 lakh crores of loans to small scale businesses so as to give economic relief to these affected businesses which constitute about Rs.2.7 trillion of the Indian economy. According to the sources, small businesses will become eligible for as much as 20% additional credit limit. This is important because these businesses have been the worst affected due to the lockdown.

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It is expected that it shall be funded by a cess that shall be levied on items like fuels etc in addition to having budgetary support. One of the officials said that it was being done to provide low-cost money to industrial units, especially micro, small and medium enterprise (MSMEs) so that they can meet their working capital requirements which shall help them to complete pending orders and receive payments.

According to FICCI, the fund should be used to promote scientific research and innovation and to create a self-sufficient industry with effective value chains within the country in areas where India is more dependant on imports.

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