Ahead of Elections, Govt. Comes up with Captivating Schemes for MSME’s: According to rating agency ICRA’s predictions: The forthcoming union budget is likely to propose measures to increase credit to agriculture and small and medium enterprises. It believes that the target for institutional credit to agriculture sector is likely to get enhanced to over Rs.12 lakh crore from Rs.11 lakh crore for FY2018- 19. Further, to increase the credit supply to the medium, small and micro enterprises (MSMEs), the refinancing target by Micro Units Development and Refinance Agency (Mudra) Bank is also expected to increase to over Rs. 4 lakh crores from Rs. 3 lakh crores for FY2018- 19. Expected Announcements to Revive NBFC’s: The govt. is likely to come up with supportive schemes, considering the current tight liquidity situation of non-banking finance companies (NBFCs) and housing finance companies (HFC’s) to foster a seamless flow of credit. Some announcements to support a steady and seamless flow of credit to NBFCs and housing finance companies are also expected in the Budget. According to the rating agency, ICRA, “the expected announcements may include: increase in the refinance to the sector, a priority sector tag for bank credit to NBFCs based on their on-lending and relaxation in risk weights for capital allocation by banks on their exposures to the sector.” According to Mr. Anil Gupta, VP & Sector Head, ICRA, “Any large-scale debt relief for small borrowers in agriculture or MSME sector will lead to higher cost of borrowings and adversely impact the profitability of banks unless the scale of such waivers is contained by targeting the borrowers under genuine stress, ” Increasing the Amount of Recapitalisation Package: The government has recently upsized the recapitalisation package by Rs. 41, 000 crores for public sector banks (PSBs) to Rs. 1.06 lakh crores for FY2019. However, a large portion of this capital is expected to be utilized against loss provisions, thereby leaving limited capital for supporting credit growth. According to Mr. Anil Gupta: We expect the capital requirements for PSBs to remain sizeable at over Rs. 50, 000 crores during FY2020 to support 10 % credit growth, but the budgetary allocation is expected to be lower than requirement on the back of expectations that PSBs may be able to raise some capital from the markets as earnings profile shows signs of improvement, ” he added. ICRA Anticipations: Depending on their capital position and ability to support credit growth, the rating agency believes that the state-owned banks would restart posing competition to private sector banks (PVBs) both on the deposit side and credit side leading to higher deposit rates and pressure on lending yields. The target for institutional credit to agriculture sector is likely to get enhanced in the Union Budget to over Rs. 12 Lakh Crores from Rs. 11 Lakh Crores for FY2018-19, said rating agency ICRA. Micro Units Development and Refinance Agency (Mudra) Bank is also expected to increase its refinancing target to over Rs. 4 Lakh Crores from Rs. 3 Lakh Crores for FY2018-19. Content credit: power2sme