To aid Indian MSMEs fight COVID, Asian Development Bank (ADB) is likely to provide $1.5 billion for India’s economic recovery and industrial support particularly to MSMEs.

As per a statement issued by the Ministry of Finance, this relief fund will be a part of the ADB’s existing COVID-19 Active Response and Expenditure Support (CARES) programme that is being offered to India. The support will be facilitated through credit guarantee schemes, MSME integration into global and national value chains through enterprise development centres, and a credit enhancement facility for infrastructure projects.

Though the government has taken several relief measures to make this lockdown easy on small businesses and help them sustain the current period in liquidity and access to credit, this additional help will help revive the faltering MSME sector.

  • SIDBI recently announced 90-day term loans to NBFCs, MFIs, scheduled commercial banks, and small finance banks for offering loans to small businesses.
  • The government is also looking at enhancing the credit guarantee limit to MSMEs to ₹5 lakh crore from around ₹1 lakh crore currently.

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The Corona impact would most certainly leave the MSME sector bruised. According to a survey done by Local Circles, over 74% small businesses and start-ups are expected to either shut down or scale down their operations in the next six months. Another survey conducted by them states that 47% of Indian start-ups and SMEs have less than 1 month of cash left, many are out of funds already.

ADB had earlier approved the loan to provide budget support to the government to tackle the adverse health and socio-economic impact of the pandemic. This additional boost of funds will help government strengthen the implementation framework and capacities of the MSME sector.