More on Covid-19

NEW DELHI: The government is considering a proposal to provide guarantee to businesses, especially micro, small and medium enterprises, for accessing additional working capital at a time when cash flow is severely impacted due to the Covid-19 lockdown.While discussions have taken place at various levels in the government, a final decision is expected to be taken soon, sources told TOI. Banks are already providing 10% additional working capital to take care of regular expenses, such as salary payments and electricity bills, and a further enhancement in the limit through some sort of credit guarantee is proposed. The finance ministry is monitoring loan approvals and disbursement almost daily to ensure that fund flow for businesses is not a problem."It may be another 15% above the existing limit, but these are only in the realm of discussion at the moment," said an official.With sales coming to a virtual halt for many businesses, meeting day-to-day expenses is proving to be a problem, prompting industry lobby groups and experts to suggest additional working capital facility, something that the government is not averse to.The government is widely expected to announce a second stimulus with MSMEs being in focus.It is, however, unclear how the guarantee will be provided and the extent to which the cover will be available, which will encourage banks to lend without fearing losses. For micro and small enterprises, a credit guarantee fund operated by Sidbi is already in place and several businesses have benefited from it.The scope of the coverage has been expanded to include medium enterprises and the government had also allocated more funds to it. To expand the scope to larger entities, the government and the Reserve Bank of India will have to work out the modalities.Besides, the extent of guarantee is also being debated. There are suggestions to provide a cover for the entire additional limit initially and then taper it as things normalise.