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Govt may guarantee ₹3 lakh cr for small-business loans

In a bid to restart the economy which is bearing the brunt of the impact of a 40-day lockdown on account of subdued consumption and halted manufacturing, the government is mulling a proposal to guarantee  3 trillion rupees (US$ 39 billion) for bank loans to small businesses. The proposal allows small businesses, which form the bedrock of the $2.7 trillion economy and are said to be the worst hit by the lockdown, to be eligible for an additional 20% of their outstanding credit limit.

Banks, financial institutions and shadow lenders will offer these loans and the government will establish a special fund to pay for any defaults. This is a welcome step since banks are concerned about rising delinquencies, to lend to small businesses.

Other governments across the world, too are coming to the rescue of the industry. The U.S., for example, stated that it would provide US$ 320 billion to make new loans to such companies that keep employees on the payroll for eight weeks under the Paycheck Protection Program; whereas the Philippines plans to give 35 billion pesos ($690 million) to workers of shuttered small businesses.