Second Covid-19 wave: Relief measures for poor, women SHGs on the cards

Govt exploring moratorium for street vendors, loans to self-help groups

A moratorium on repayments of working capital loans for street vendors and collateral-free loans to women self-help groups (SHGs) following the second wave of the pandemic are on the government’s drawing-board now.

The Ministry of Housing and Urban Affairs (MoHUA), which administers the PM Street Vendors Atmanirbhar Nidhi (PM SVANidhi), is exploring if the scheme can be further enhanced or a moratorium can be provided to street vendors.

It is being discussed if advisories must be issued to banks to restructure the loans given to street vendors and collateral-free loans that went to self-help groups, or whether consultation with the Reserve Bank of India (RBI) would be needed on this, said a top government official.

The PM-SVANidhi was launched to provide working capital loans up to ~10,000 to about 5 million street vendors. The loan has a tenure of one year, and is to be repaid in monthly instalments.

Street vendors availing themselves of loans under the scheme get a 7 per cent interest subsidy from the government, and banks get graded guarantee cover for the loans sanctioned.

So far, about 2.405 million loans have been sanctioned, and 2.053 million of those have been disbursed under the scheme.

For women self-help groups, under the Atmanirbhar Bharat package, Finance Minister Nirmala Sitharaman had announced collateral-free loans up to ~20 lakh to tide over the financial crisis inflicted by lockdown. The government targets covering over 6.6 million SHGs that include more than 71.4 million rural women in India.

Experts say a special dispensation will not be needed to grant a moratorium or restructure such loans as their tenure can be increased based on the recent relief provided by the RBI.

The RBI has provided a resolution framework 2.0 in respect of Covid-related stress, and lenders can utilise this dispensation to provide relief to retail and micro, small, and medium enterprises that were standard accounts as in March 2021, said Prakash Agarwal, head (financial institutions), India Ratings and Research.

Banks, if they think fit, can utilise these provisions to provide comfort to their borrowers, he added.

Anil Gupta, vice-president (financial sector ratings), ICRA, said the decision to provide a moratorium as part of restructuring should lie with the boards of the lending institutions. If a blanket application for restructuring such loans is insisted upon, it will distort credit culture, Gupta said.

Providing a moratorium on such loans should at best be left to the banks or done on the request of borrowers, he added.

Earlier this month, the RBI announced the restructuring framework 2.0, under which individuals and small businesses with exposure of up to Rs 25 crore and which had not availed themselves of restructuring under the previous framework and classified as standard accounts on March 31, 2021, would be eligible for restructuring.

Banks can extend the tenor of the loan by up to two years and also offer a moratorium for this period.

On Monday, the central bank said blue-collared workers, doctors, health care staff, law and order and municipal personnel, daily-wagers, and small businesses had been hit the hardest by the second wave of the Covid-19 pandemic, and there should be more measures taken to alleviate their pain.