Covid 19 Financial Resource Guide

Introduction

The coronavirus epidemic is beginning to impact Indian enterprises and has caused a massive economic decline in the past few weeks. It is now referred to as the black swan phenomenon that will be the most significant event of this century, impactingon the global economy and India. A recent survey conducted by the industry revealed that companies need more certainty regarding their future. Employment is also in danger in the coming months because several companies have indicated that they are considering reducing the number of employees in their respective businesses.

The inexplicably wide spread of COVID-19 has caused a drastic decline in the major indices, which indicates the potential for it to impact GDP growth in a significant way. While the general impact of COVID-19 on credit growth is likely to impact most sectors negatively, the severity and extent of the effects will likely vary depending on the duration and intensity of disruption.

COVID-19 Startup Assistance Scheme

Startups are constantly evolving and often need more resources. With lockdowns currently occurring across the country due to the COVID-19 virus outbreak, startups must discover new ways of operating their businesses. They should be able to meet their requirements for working capital while also having to plan for growth in the future. The Government of India is taking proactive steps to help startups and companies affected by the closure of COVID-19.

In this respect, SIDBI Small Industries Development Bank of India (SIDBI) has been working to offer support and stability for the startups in these situations through schemes like Covid-19’s Startup Assistance Program (‘CSAS’). This scheme is designed to help innovative companies that have demonstrated the capacity to adapt to the economic impacts of Covid-19 and have ensured that their employees are safe and have financial security.

Startups that meet the eligibility criteria

• Government-defined startups have received funding from at least one Alternate Investment Fund registered with SEBI.
• Startups that have a minimum staff of at least 50. This could also include foot soldiers (Relaxable on a case-by-case basis).
• Startups with the FY 2019 or FY 2020 minimum revenue range of INR 10 crore and INR 60 crore.
• Startups must have an economic model that is positive for each unit.
• Startups must have been in operation within less than ten years.
• Startups must have a positive net worth.
• Startups should have displayed inventive ways to ensure business continuity during COVID-19.
• Startups must take appropriate steps to ensure employee safety and financial stability.
• The founder or promoter of a startup must have a stake in the venture.

1. Collateral-free automatic loan

• The cost is Rs 3 lakh crore, benefiting 45 lakh micro- and small-sized businesses.
• MSMEs that have an amount of. Twenty-five crores in outstanding loans and a turnover of 100 crores will be eligible for credit guarantee-backed loans for four years.
• Interest to be limited.
• There will be an extended 12-month moratorium regarding principal payment.
• Available until October. 31st.

2. Subordinate debt for stressed MSMEs

• Rs. 20000 crore investment 2.25 lakh MSMEs benefit.
• The government will provide an amount of Rs. 4,400 crore for partial credit guarantee assistance to banks.
• Banks loan money to promoters so that they can use it to reinvest it with equity.

3. Fund of funds for MSMEs

• Corpus of Rs. 10,000 crores.
• The funds will operate as secondary and primary funds.
• This will help leverage Rs 50 million on the second fund.
• This will help MSME grow to be included on mainboards.

4. MSME definition amended

• Similar restrictions apply to manufacturing and services units.
• Micro: Investments 1 crore; Turnover 5 crores. Five crores
• Small: Investment < Rs. 10 crores; Turnover < Rs. 50 crores
• Micro: Investment < Rs. 1 crore; Turnover 5 crores. Five crores

5. Only local bids will be accepted for government tenders that exceed 200 crores. 200 crores

• Global tenders are not allowed for procurement by the government up to 200 crore.
• This helps MSMEs combat unfair international competition.

6. MSME dues & access to the market

• Linking with the E-market for MSMEs since there will be no shows or trade fairs soon.
• MSMEs’ receivables from the government and PSUs are expected to be paid in 45 days

Personal Loan Schemes for Covid-19 Pandemic

In order to assist those struggling with the cash crisis during the coronavirus outbreak, banks like Bank of Baroda, Punjab National Bank, Bank of Maharashtra, and Bank of India have launched new personal loan programs. These loans have a softer requirement for clients. According to experts, these loans are available to customers who already have urgent funds to deal with problems with cash flow. People who face liquidity-related problems due to the lockdown may want to look at COVID-19-specific loans.

PM CARES Fund

• As part of COVID-19-related funding sources, a specific fund, “Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund),” has been established to aid the people affected by the disease.
• The Income Tax Act has been modified to give similar tax benefits for PM CARES Fund, the Prime Minister’s National Relief Fund.
• Contributions for PM CARES Fund PM CARES Fund is eligible to receive a tax deduction of 100% according to section 80G under the Income Tax Act. Notably, the deduction maximum of 10% of the gross income will not apply in this situation.
• The amount of money donated to this Fund until June 30, 2020, is eligible to deduct tax from the FY 2019-20 income.
• So, corporates and individuals who have chosen to adopt this new Tax Regime for FY 2020-21 can give towards the PM CARES Fund. PM CARES Fund and claim deductions under section 80G on the income earned during FY 2019-2020 without losing the ability to claim concessional tax in FY 2020-21.

End Note

The Finance Minister of India, Nirmala Sitharaman, announced several financial aid measures being implemented by India’s Government of India because of the Coronavirus outbreak. In the wake of the worldwide spreading of Covid-19 or Coronavirus, the Indian government has taken the initiative to increase its funds to help the economy survive tough times.