New Delhi: India will provide collateral-free loans worth $40 billion to boost liquidity for small businesses and help the economy tide over the coronavirus outbreak.
The loans will benefit up to 4.5 million small businesses, Finance Minister Nirmala Sitharaman said in New Delhi on Wednesday. The program will be open until Oct. 31.
“Essentially this is to spur growth and to build a very self-reliant India,” Sitharaman said. “It addresses ease of doing business, compliance and due diligence and the intention is also to build local brands.”
Prime Minister Narendra Modi Tuesday said his government will spend an amount equivalent to 10% of the nation’s gross domestic product to help the economy get back on its feet after weeks of stay-at-home restrictions to beat the pandemic. The resultant halt to non-essential consumption set up Asia’s third-largest economy for its first annual contraction in four decades as businesses collapsed and jobs were lost.
Modi’s spending plan totaling 20 trillion rupees ($265 billion) includes measures already unveiled by the government and also by the central bank such as provision for cheap cash to banks and the reduction in its cash reserve ratio.
The details of the package will be shared in tranches, Sitharaman said, adding that today’s announcement covers 15 different measures, including six pertaining to small businesses and more will be announced over the course of the next few days.
As part of the plan, small firms will be eligible to borrow collateral-free automatic loans for a four-year tenor with 12-month freeze on principal repayments. The loans will be guaranteed by the government.