Universal debt relief scheme: Govt planning to provide relief to small borrowers, micro-entrepreneurs, says Corporate Affairs Secretary Injeti Srinivas

The Corporate Affairs Secretary said the cost of the scheme is unlikely to exceed Rs 20,000 crore, but will benefit millions in the very small-ticket loan category.

FP Staff May 13, 2019 14:08:27 IST
Universal debt relief scheme: Govt planning to provide relief to small borrowers, micro-entrepreneurs, says Corporate Affairs Secretary Injeti Srinivas
  • Small borrowers with annual income up to Rs 60,000 are likely to benefit from the scheme.

  • Injeti Srinivas said there was an imminent crisis in the non-banking financial companies (NBFCs) sector

  • Srinivas said the NBFC sector is facing issues of credit squeeze, over-leveraging and misadventures by some large entities

The government has reportedly prepared a universal debt relief scheme for small borrowers below a specified income, Corporate Affairs Secretary Injeti Srinivas said in a media interview.

Srinivas, in an interview with The Economic Times, said, “This will be a well-structured loan waiver programme across sectors for small farmers, artisans, microenterprises or other individuals. It will be a universal debt relief scheme for the poor.”

The Corporate Affairs Secretary told the newspaper that the cost of the scheme is unlikely to exceed Rs 20,000 crore, but "will benefit millions in the very small-ticket loan category."

According to Mint, small borrowers with annual income up to Rs 60,000 are likely to benefit from the scheme.

Srinivas, in an interview with the PTI, said there was an "imminent crisis" in the non-banking financial companies (NBFCs) sector as misadventures by some large entities and credit squeeze present a perfect recipe for disaster.

In recent months, the country's financial system has been grappling with multiple woes in the wake of the turmoil at diversified IL&FS group as well as debt defaults by some other large entities.

Universal debt relief scheme Govt planning to provide relief to small borrowers microentrepreneurs says Corporate Affairs Secretary Injeti Srinivas

Representational image. Reuters.

Srinivas said the NBFC sector is facing issues of the credit squeeze, over-leveraging and misadventures by some large entities.

"There is an imminent crisis in the NBFC sector. There is a credit squeeze, over-leveraging, excessive concentration, massive mismatch between assets and liabilities, coupled with some misadventures by some very large entities, which is a perfect recipe for disaster," Srinivas said.

However, he added that "responsible" companies are managing the risk well and are not facing such a dire situation.

Srinivas also said corporate governance in India is being put to test.

"It is a defining moment. The way things are moving, in the medium to long term it will be for the good. In the short term, there can be turbulence," he said.

"If you are responsible, you manage the risks. There are many companies in the country that have strong corporate governance. They take risks but manage them as well. So, they don't face such dire situation that some others are facing today," Srinivas said.

Amid instances of the situation of non-performing assets (NPAs) being linked to external factors, Srinivas noted that it would not be a convincing explanation.

"To say that the situation (NPA) can be attributed entirely to external factors and business risks is not a convincing answer because there is something known as responsible behaviour," he emphasised.

Earlier this month, former Prime Minister Manmohan Singh said the banking sector is "under severe stress" and the way out of "this mess" is to reverse some "gross distortions", work closely with the RBI, re-start the process of credit delivery and ensure sufficient liquidity and cash in circulation.

The NPA "scare" has brought lending to a virtual halt, the former prime minister had said, adding that a "one-size-fits-all approach" drove companies into insolvency while demonetisation shut out all sources of informal credit.

However, finance minister Arun Jaitley had dismissed the concerns, saying, "When an economist turns into a politician, he loses sense of both economy and politics".

"Dr Manmohan Singh left behind in 2014 an economic slowdown, policy paralysis and corruption. He brought down his party to lowest ever strength in Parliament. India was a part of the fragile five. Today he regards the world's the fastest growing major economy as disastrous," Jaitley had said.

With PTI inputs

Updated Date:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Jaitley shrugs off Congress threat to disrupt Parliament over Lalit Modi controversy
Politics

Jaitley shrugs off Congress threat to disrupt Parliament over Lalit Modi controversy

Finance Minister Arun Jaitley today brushed aside concerns of Parliament's upcoming monsoon session being disrupted over the Lalit Modi controversy, saying some people may be relevant to TV channels but not to governance.

CSR no more an act of magnanimity; no intention to criminalise any default: Corporate Affairs Secretary Injeti Srinivas
Business

CSR no more an act of magnanimity; no intention to criminalise any default: Corporate Affairs Secretary Injeti Srinivas

As per data available with the ministry from disclosures made by companies, more than Rs 52,000 crore has been spent from 2014-15 to 2017-18 period towards CSR activities

Jet Airways crisis: Good outcome from creditors-company negotiations better than insolvency, says govt official
Business

Jet Airways crisis: Good outcome from creditors-company negotiations better than insolvency, says govt official

Corporate Affairs Secretary Injeti Srinivas was responding to a query on whether Jet Airways is a fit case to be referred under the Insolvency and Bankruptcy Code (IBC)