UPSC CURRENT AFFAIRS| PRELIMS & MAINS | 21st May 2020

Daily UPSC Current Affairs | 21st May 2020

Dear Aspirants
IASbhai Daily Current Affairs for UPSC PRELIMS & MAINS 2020 is an initiative to dilute major articles from leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Hence we choose articles on daily basis and analyse them with respect to UPSC PRELIMS 2020.

Believe in yourself, take on your challenges, dig deep within yourself to conquer fears. Never let anyone bring you down. You got to keep going.– Chantal Sutherland

HIGHLIGHT INFO:

ORANGE COLOUR: Important for Prelims.

RED COLOUR: Important for Mains.

BLACK COLOUR: Must Read !

BLUE COLOUR : Important Links/Survey.

PINK COLOUR: Reports/Themes/Summits.

 “Partial Credit Guarantee Scheme (PCGS)”

      HEADLINES:

Cabinet approves modifications in the existing “Partial Credit Guarantee Scheme (PCGS)”

      WHY IN NEWS:

Portfolio Guarantee for purchase by PSBs of Bonds or Commercial Papers (CPs) with a rating of AA and below

SYLLABUS COVERED: GS 3:Scheme

      ISSUE: 

  The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the Sovereign portfolio guarantee of up to 20% of first loss for purchase of Bonds or Commercial Papers (CPs) with a rating of AA and below (including unrated paper with original/ initial maturity of up to one year) issued by NBFCs/ MFCs/Micro Finance Institutions (MFIs) by Public Sector Banks (PSBs) through an extension of the Partial Credit Guarantee Scheme (PCGS).

KEY FEATURES :

  • The Cabinet also approved modifications in the existing PCGS on purchase of pooled assets, increasing its coverage by—
  • Making NBFCs/HFCs reported under SMA-1 category on technical reasons alone during the last one year period prior to 1.8.2018 eligible.

  Earlier NBFCs/HFCs reported as SMA-1 or SMA-2 during this period were ineligible under the Scheme.

  • Relaxing the net profit criteria to the extent that the concerned NBFC/HFC should now have made a profit in at least one of the financial years of FY 2017-18, FY 2018-19 and 2019-20.
  • Earlier, the NBFC/HFC should have made a net profit in at least one of the financial years of FY 2017-18 and 2018-19.
  • Relaxing the criteria regarding date of origination of assets to include new assets originating up to at least six months prior to the date of initial pool rating.
  • Earlier, only assets originated up to 31.3.2019 were eligible under the Scheme.
  • Extending the Scheme from 30.6.2020 to 31.3.2021 for purchase of pooled assets.
  • The existing PCGS was issued on 11.12.2019 offering sovereign guarantee of up to 10% of first loss to PSBs for purchasing pooled assets worth rated BBB+ or above worth up to Rs. 1,00,000 crore, from financially sound NBFCs/ MFCs.
  • The outbreak of COVID-19 along with lockdown of business activity has now necessitated adoption of additional measures to support NBFCs and HFCs – On the liabilities side by providing a sovereign guarantee to cover purchase of Bonds/CPs issued by NBFCs/HFCs as well as MFIs which also play a critical role in extending credit to small borrowers; and on the assets side by modifying the existing PCGS to widen its coverage,

IMPLEMENTATION SCHEDULE:

  • The window for this one-time partial credit guarantee offered by Gol will remain open till 31st March, 2021 for purchase of pooled assets and for the period as specified under the Scheme for purchase of Bonds/CPs, or till such date by which Rs. 10,000 crore worth of guarantees, including both guarantees toward purchase of pooled assets and Bonds/ CPs, are provided by the Government, whichever is earlier.

      IASbhai WINDUP: 

IMPACT:

  • COVID-19 crisis and consequent lockdown restrictions are likely to have a negative impact on both collections and fresh loan disbursements, besides a deleterious effect on the overall economy.
  • This is anticipated to result not only in asset quality issues for the NBFC/ HFC/ MFI sector, but also low loan growth as well as higher borrowing costs for the sector, with a cascading effect on Micro, Small and Medium Enterprises (MSMEs) which borrow from them.
  • While the RBI moratorium provides some relief on the assets side, it is on the liabilities side that the sector is likely to face increasing challenges.
  • The extension of the existing Scheme will address the liability side concerns.
  • Since NBFCs, HFCs and MFIs play a crucial role in sustaining consumption demand as well as capital formation in small and medium segment, it is essential that they continue to get funding without disruption, and the extended PCGS is expected to systematically enable the same.
     SOURCES:THE HINDU & PIB/DAILY CURRENT AFFAIRS for UPSC CSE Prelims & Mains

 “Scheme for formalisation of Micro Food Processing Enterprises (FME)”

      HEADLINES:

Cabinet approves “Scheme for formalisation of Micro Food Processing Enterprises (FME)”

      WHY IN NEWS:

Hot from PIB !

SYLLABUS COVERED: GS 3:SCHEMES

      LEARNING: 

For PRELIMS go through the methodology of sharing between centre and state ! How the institutional credit is disbursed and the period of this scheme.

For MAINS keep an eye on the background and the beneficiaries of this scheme.

      ISSUE: 

BACKGROUND:

  • There are about 25 lakh unregistered food processing enterprises which constitute 98% of the sector and are unorganized and informal.
  • Nearly 66 % of these units are located in rural areas and about 80% of them are family-based enterprises.
  • This sector faces a number of challenges including the inability to access credit, high cost of institutional credit, lack of access to modern technology, inability to integrate with the food supply chain and compliance with the health &safety standards.
  • Strengthening this segment will lead to reduction in wastage, creation of off-farm job opportunities and aid in achieving the overarching Government objective of doubling farmers’ income.

DETAILS OF THE SCHEME:

  • The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to a new Centrally Sponsored Scheme – “Scheme for Formalisation of Micro food processing Enterprises (FME)” for the Unorganized Sector on All India basis with an outlay of Rs.10,000 crore.

  The expenditure will be shared by GOI and the States in ratio of 60:40.

OBJECTIVES:

  • Increase in access to finance by micro food processing units.
  • Increase in revenues of target enterprises.
  • Enhanced compliance with food quality and safety standards.
  • Strengthening capacities of support systems.
  • Transition from the unorganized sector to the formal sector.
  • Special focus on women entrepreneurs and Aspirational districts.
  • Encourage Waste to Wealth activities.
  • Focus on minor forest produce in Tribal Districts.

SALIENT FEATURES:

  • 2,00,000 micro-enterprises are to be assisted with credit linked subsidy.
  • Scheme will be implemented over a 5 year period from 2020-21 to 2024-25.
  • Cluster approach.
  • Focus on perishables.

SUPPORT TO INDIVIDUAL MICRO UNITS:

  Micro enterprises will get credit linked subsidy @ 35% of the eligible project cost with ceiling of Rs.10 lakh.

  • Beneficiary contribution will be minimum 10% and balance from loan.
  • On-site skill training & Handholding for DPR and technical upgradation.

SUPPORT TO FPOS/SHGS/COOPERATIVES:

  • Seed capital to SHGs for loan to members for working capital and small tools.
  • Grant for backward/ forward linkages, common infrastructure, packaging, marketing & branding.
  • Skill training & Handholding support.
  • Credit linked capital subsidy.

IMPLEMENTATION SCHEDULE:

  • The scheme will be rolled out on All India basis.
  • Back ended credit linked subsidy will be provided to 2,00,000 units.

  Seed capital will be given to SHGs (@Rs. 4 lakh per SHG) for loan to members for working capital and small tools.

ADMINISTRATIVE AND IMPLEMENTATION MECHANISMS

  • The Scheme would be monitored at Centre by an Inter-Ministerial Empowered Committee (IMEC) under the Chairmanship of Minister, FPI.
  • A State/ UT Level Committee (SLC) chaired by the Chief Secretary will monitor and sanction/ recommend proposals for expansion of micro units and setting up of new units by the SHGs/ FPOs/ Cooperatives.
  • The States/ UTs will prepare Annual Action Plans covering various activities for implementation of the scheme, which will be approved by Government of India.
  • A third party evaluation and mid-term review mechanism would be built in the programme.

STATE/ UT NODAL DEPARTMENT & AGENCY

The State/ UT Government will notify a Nodal Department and Agency for implementation of the Scheme.
 

  • State/ UT Nodal Agency (SNA) would be responsible for implementation of the scheme at the State/ UT level including preparation and validation of State/ UT Level Upgradation Plan, Cluster Development Plan, engaging and monitoring the work of resource groups at district/ regional level, providing support to units and groups, etc.

NATIONAL PORTAL & MIS

  • A National level portal would be set-up wherein the applicants/ individual enterprise could apply to participate in the Scheme.
  • All the scheme activities would be undertaken on the National portal.

CONVERGENCE FRAMEWORK

  • Support from the existing schemes under implementation by the Government of India and State Governments would be availed under the scheme.
  • The Scheme would attempt to fill in the gaps, where support is not available from other sources, especially for capital investment, handholding support, training and common infrastructure.

      IASbhai WINDUP: 

IMPACT AND EMPLOYMENT GENERATION:

  • Nearly eight lakh micro- enterprises will benefit through access to information, better exposure and formalization.

Credit linked subsidy support and hand-holding will be extended to 2,00,000 micro enterprises for expansion and upgradation.

  • It will enable them to formalize, grow and become competitive.
  • The project is likely to generate nine lakh skilled and semi-skilled jobs.
  • Scheme envisages increased access to credit by existing micro food processing entrepreneurs, women entrepreneurs and entrepreneurs in the Aspirational Districts.
  • Better integration with organized markets.
  • Increased access to common services like sorting, grading, processing, packaging, storage etc.
     SOURCES:THE HINDU & PIB/DAILY CURRENT AFFAIRS for UPSC CSE Prelims & Mains

Emergency Credit Line Guarantee Scheme (ECLGS)

      HEADLINES:

Cabinet approves additional funding of up to Rupees three lakh crore through introduction of Emergency Credit Line Guarantee Scheme (ECLGS)

      WHY IN NEWS:

100 per cent credit guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs)

SYLLABUS COVERED: GS 3:Scheme

      ISSUE: 

  Guaranteed Emergency Credit Line (GECL) facility to eligible Micro, Small and Medium Enterprise (MSME) borrowers, including interested MUDRA borrowers

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given the following approvals:

  • To enable additional funding of up to Rs. three lakh crore to eligible MSMEs and interested MUDRA borrowers by way of “Emergency Credit Line Guarantee Scheme.”

100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC)  for additional funding of up to Rs. three lakh crore to eligible MSMEs and interested MUDRA. borrowers, in the form of a Guaranteed Emergency Credit Line (GECL) facility.  
 

  • For this purpose, corpus of Rs. 41,600 crore shall be provided by Government of India spread over the current and the next three financial years.
  • The Cabinet also approved that the Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020, or till an amount of Rs 3,00,000 crore is sanctioned under the GECL, whichever is earlier.

DETAILS:

  • The Emergency Credit Line Guarantee Scheme (ECLGS) has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.
  • The Scheme aims at mitigating the economic distress being faced by MSMEs by providing them additional funding of up to Rs. 3 lakh crore in the form of a fully guaranteed emergency credit line.
  • The main objective of the Scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs) to increase access to, and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by providing them 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.

THE SALIENT FEATURES OF THE SCHEME INCLUDE :

  1. The amount of GECL funding to eligible MSME borrowers either in the form of additional working capital term loans (in case of banks and FIs), or additional term loans (in case of NBFCs) would be up to 20% of their entire outstanding credit up to Rs. 25 crore as on 29th February, 2020.
  2. The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
  3. Tenor of loan under Scheme shall be four years with moratorium period of one year on the principal amount.
  4. No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
  5. Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

IMPLEMENTATION SCHEDULE:

  • The Scheme would be applicable to all loans sanctioned under GECL during the period from the date of announcement of the Scheme to 31.10.2020, or till an amount of Rs three lakh crore is sanctioned under the GECL, whichever is earlier.

      IASbhai WINDUP: 

IMPACT:

  • In view of the critical role of the MSME sector in the economy and in providing employment, the proposed Scheme is expected to provide much needed relief to the sector by incentivizing MLIs to provide additional credit of up to Rs.3 lakh crore to the sector at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.
     SOURCES:THE HINDU & PIB/DAILY CURRENT AFFAIRS for UPSC CSE Prelims & Mains

 

DISCOVER MORE : Important Daily Current Affairs for UPSC PRELIMS 2020

 

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