COVID Responsive Policy Series 1 Impact of COVID-19 on Borrower MSMEs -Issues and Pointers for Way Forward

The advent of Covid-19 in 2020 had a cascading impact on the MSMEs of India, the banking system and the economy. Thanks largely to the quick liquidity infusion support to MSMEs through the banks, guaranteed by the Government of India and a few other measures to mitigate the impact of covid that helped provide a good degree of resilience to MSMEs without adversely affecting the sustenance of the banking system. There are however still a number of after-effects that still need to be dealt with across all sectors, particularly in the wake of rising NPAs thus requiring loan restructuring and liquidation of loans in the case of unviable enterprises.

In order to help identify the key areas of concern and suggest ways to resolve/mitigate them, the ‘Foundation for MSME Clusters’ (FMC), a not-for-profit NGO with support drawn from a European Union funded project, constituted a ‘Think Tank Group’ comprising of seven eminent persons. While two of them were drawn from the national level MSME industry association, the other five came from the banking sector in their individual capacity. They deliberated over a period of two months in October – November 2021 and recommended a slew of measures by mid December 2021 that can help the Government, Banks and relevant institutions to further work upon in their own context. These recommendations provided in the attached report along with the context and methodology should therefore be seen as intelligent pointers under its ‘COVID Response Policy Series 1’ to build on.