Finance Minister Nirmala Sitharam allocated INR 30,000 crore special liquidity scheme for the non-banking finance companies (NBFCs), micro finance institutions (MFIs), and housing finance companies (HFCs). Managing director of the alternative lending NBFC PinCap, Praveen Sinha welcomed the decision of the Finance Ministry to provide liquidity support to NBFCs and other financial institutions.
While addressing a press briefing on the details of the INR 20 lakh crore special fund, FM Sitharaman said that the allocation to the aforementioned financing institutions will supplement the government and the RBI to augment liquidity by providing guarantee to investment grade securities. “We have been hearing that NBFCs were not able to get enough resources despite efforts from government and RBI, especially those which were particularly not highly rated,” she added.
While parsing the actions of the government to bring economy back on track, Praveen Sinha has suggested that now the RBI and government needs to ensure the implementation of the announced scheme at ground level. “NBFCs have also been given good attention in the package. However, we have seen that the policy decision takes a lot of time to reach the ground level/executing team. Moreover, we still find banks reluctant in providing actively under these schemes,” says Praveen Sinha jabong co-founder.
NBFCs largely finance the backbone of the Indian economy — MSMEs, the sector which is usually cash starved. The imposition of the lockdown turned down the revenue of several MSMEs to zero and hence, creating an adverse situation for the survival of the sector. Praveen hailed the FM Sitharaman for allocating a huge chunk of the package to the sector. He said, “The scheme also has INR three lakh crore collateral free loan scheme for businesses, especially MSMEs. This will give a breathing space to the fund-starved MSMEs.”
Praveen is satisfied with the allocation of the funds to NBFCs and MSMEs, however he is of the view that the government needs to announce complimentary financial packages to strengthen the economy as soon as possible. “Overall, this package is a very good start, but it will have to be complimented with many more stimuli to bring back the economy to a healthy situation,” says Sinha. Praveen’s FinTech NBFC — PinCap has provided easy loans to a significant number of MSMEs amidst the Covid-19 crisis.