The government on Monday signed a $750 million agreement with the World Bank with the aim of increasing flow of finance into the hands of micro, small and medium enterprises (MSMEs), the finance ministry said in a release. The agreement is expected to provide immediate liquidity to 1.5 million MSMEs, the release said, adding that this is the first step among a broader set of reforms that are needed to propel the MSME sector over time.
The agreement with World Bank will support the government in providing guarantees to incentivise banks and non-banking finance companies (NBFCs) to continue lending to MSMEs. "This program will support government's efforts to channel that liquidity to the MSME sector by de-risking lending from banks and Non-Banking Financial Companies (NBFCs) to MSMEs through a range of instruments, including credit guarantees," the finance ministry said.
Including the latest project, the World Bank has so far committed $2.75 billion to support India's COVID-19 response.