Economic package won't fully offset negative impact of Covid-19: Moody's

While these measures will help ease asset risks for the financial sector, they will not fully offset the negative impact from the coronavirus outbreak, Moody's said.

Moody's Investors Service on Tuesday said the measures announced by the government for financial institutions as part of Rs 20 trillion-economic package will help ease their asset risk, but will not fully offset the negative impact from the Covid-19 outbreak.

The government last week announced a support package of Rs 3.70 trillion for micro, small and medium enterprises (MSME) sector, Rs 75,000 crore for non-banking financial companies (NBFCs) and Rs 90,000 crore for power distribution companies.

This is part of the overall economic package announced by the government over last week to mitigate the economic impact of coronavirus crisis.

While these measures will help ease asset risks for the financial sector, they will not fully offset the negative impact from the coronavirus outbreak, Moody's said in a commentary titled Financial Institutions - India: Support measures to provide relief to the financial system, but will not solve all issues'.

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On MSME package, the rating agency said the sector was already under stress before coronavirus outbreak and further slowdown in economic growth will lead to more liquidity woes.

With regard to measures for NBFCs, it said the support is far lower than the immediate liquidity requirements of those companies and the sector will continue to pose risks to the banks.

Amongst the measures, the most significant is the government guaranteed, automatic and uncollateralised loans to MSMEs.

Such loans will help improve MSMEs' near-term liquidity and ease asset risks for the banks and NBFCs who are the key lenders to the sector, it said.

Covid-19: PNB opens emergency credit line for MSMEs to enhance liquidity

There is a facility of standby line of credit for MSMEs as well as PNB COVID-19 Emergency Credit Facility (PNB-CECF), the bank said.

Punjab National Bank on Wednesday said it has opened an emergency credit line for the MSME sector to help it tide over liquidity issues amid the coronavirus crisis.

It has also liberalised the working capital assessment (LWCA) model for MSME borrowers having limits of Rs 5 crore and above, the state-owned lender said at a webinar hosted with industry body PHD Chamber to address the issues of micro, small and medium enterprises.

There is a facility of standby line of credit for MSMEs as well as PNB COVID-19 Emergency Credit Facility (PNB-CECF), the bank said.

There are also other policy initiatives like restructuring of MSME advances, interest subvention scheme, TReDS, Mudra loan products, Credit Guarantee Trust for MSMEs and PSB loans in 59 minutes, it added.

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The bank's MD and CEO SS Mallikarjuna Rao said in the backdrop of the nationwide lockdown, the bank has organised the webinar to address the liquidity requirement of its customers through the online platform.

This forms a part of its 'Mega MSME Outreach' aimed at connecting with its MSME customers across the country and to address their challenges.

He said the bank has witnessed a humongous response from borrowers across the country through this outreach programme.

Karnataka exempts aerospace and defence firms from Covid-19 lockdown

Indian aerospace and defence firms believe that uninterrupted and timely supply remains critical for their credibility.

In a decisive measure to protect Karnataka based companies that manufacture parts and systems for the assembly lines of global aerospace and defence (A&D) majors like Boeing and Airbus, the state government has exempted local A&D manufacturers from the nationwide anti-Covid-19 lockdown and permitted them to resume manufacturing activities with immediate effect.

“…The State Government hereby [exempts] industries supplying to Defence & Aerospace manufacturing… from the purview of the Lockdown and further to relax the restrictions imposed on the movement of workers and staff working in these industrial units,” stated a circular issued on Wednesday by Gaurav Gupta, the principle secretary in Karnataka’s commerce and industries department.

This comes as a relief to Karnataka’s A&D manufacturing firms, consisting mostly of medium, small and micro enterprises (MSMEs) such as Dynamatic Technologies, Rossell India Ltd and Sasmos, who are, for certain components and systems, the sole suppliers to Boeing production lines in the US and the Airbus assembly line in Toulouse, France.

For example, Dynamatic builds “flap track beam assemblies” for all 58 single-aisle airliners that Airbus assembles each month. Without the on-time delivery of this crucial system, Airbus’ assembly of A-318, A-319, A-320 and A-321 airliners in France (54 per month) and China (four per month) would grind to a halt.

Indian A&D firms believe that uninterrupted and timely supply remains critical for their credibility. In the US and France, A&D production continues, even as other factories and shops have been shuttered to stop the spread of Covid-19. The US federal government has ordered the A&D industry’s 2.5 million employees to continue reporting for work, after the defence industry lobbied Congress and the Pentagon for a special dispensation on the grounds of national security.