The Andhra Pradesh government is creating a Rs 200 crore fund to help micro, small and medium enterprises, which contribute about 8% to the gross state domestic product, overcome the liquidity crisis caused by the COVID-19 lockdown.
Under this, MSMEs would be extended loans without collateral security from Rs 2 lakh to Rs 10 lakh each with a six-month repayment holiday, according to Special Chief Secretary, Industries and Commerce, Rajat Bhargava.
The lockdown pushed the MSME sector, which has a staggering 97,428 units across the state and employing 9,68,269 people, into a deep crisis as over 94% of them are completely shut.
The 6% of MSMEs currently running are operating at only 25-30% of their capacity.
Chief Minister Y S Jagan Mohan Reddy wrote to Prime Minister Narendra Modi on Thursday requesting that the Centre create a fund of funds for supporting the MSMEs in securing additional liquidity.
"The fund will provide the much-needed helping hand to the MSMEs that are the worst-hit by the lockdown.
The loans will come in handy for the small industrialists to meet their liquidity requirements and the repayment can be done within three years," Bhargava told PTI.
While the state government would contribute Rs 25 crore to the fund, the balance amount would be mobilised from SIDBI and other national banks.
The scheme would be in force till the end of this September.
The RBI has already announced providing a Special Liquidity Facility to SIDBI to enable it to provide liquidity support to the MSME sector and meet sectoral credit needs.
The state government also promised to release a sum of Rs 905 crore in two instalments towards industrial incentives to the ailing MSME sector.
"Payment of industrial incentives has been pending for a long time and all the old dues will be cleared now and also fresh incentives will be released in May and June," the Special Chief Secretary said.
This would also inject cash and help the MSMEs restart their activities.