The government has reportedly prepared a universal debt relief scheme for small borrowers below a specified income, Corporate Affairs Secretary Injeti Srinivas said in a media interview.
Srinivas, in an interview with The Economic Times, said, "This will be a well-structured loan waiver programme across sectors for small farmers, artisans, microenterprises or other individuals. It will be a universal debt relief scheme for the poor."
The Corporate Affairs Secretary told the newspaper that the cost of the scheme is unlikely to exceed Rs 20,000 crore, but "will benefit millions in the very small-ticket loan category."
According to Mint, small borrowers with annual income up to Rs 60,000 are likely to benefit from the scheme.
Srinivas, in an interview with the PTI, said there was an "imminent crisis" in the non-banking financial companies (NBFCs) sector as misadventures by some large entities and credit squeeze present a perfect recipe for disaster.
In recent months, the country's financial system has been grappling with multiple woes in the wake of the turmoil at diversified IL&FS group as well as debt defaults by some other large entities.
Srinivas said the NBFC sector is facing issues of the credit squeeze, over-leveraging and misadventures by some large entities.
"There is an imminent crisis in the NBFC sector. There is a credit squeeze, over-leveraging, excessive concentration, massive mismatch between assets and liabilities, coupled with some misadventures by some very large entities, which is a perfect recipe for disaster," Srinivas said.
However, he added that "responsible" companies are managing the risk well and are not facing such a dire situation.
Srinivas also said corporate governance in India is being put to test.
"It is a defining moment. The way things are moving, in the medium to long term it will be for the good. In the short term, there can be turbulence," he said.
"If you are responsible, you manage the risks. There are many companies in the country that have strong corporate governance. They take risks but manage them as well. So, they don't face such dire situation that some others are facing today," Srinivas said.
Amid instances of the situation of non-performing assets (NPAs) being linked to external factors, Srinivas noted that it would not be a convincing explanation.
"To say that the situation (NPA) can be attributed entirely to external factors and business risks is not a convincing answer because there is something known as responsible behaviour," he emphasised.
Earlier this month, former Prime Minister Manmohan Singh said the banking sector is "under severe stress" and the way out of "this mess" is to reverse some "gross distortions", work closely with the RBI, re-start the process of credit delivery and ensure sufficient liquidity and cash in circulation.
The NPA "scare" has brought lending to a virtual halt, the former prime minister had said, adding that a "one-size-fits-all approach" drove companies into insolvency while demonetisation shut out all sources of informal credit.
However, finance minister Arun Jaitley had dismissed the concerns, saying, "When an economist turns into a politician, he loses sense of both economy and politics".
"Dr Manmohan Singh left behind in 2014 an economic slowdown, policy paralysis and corruption. He brought down his party to lowest ever strength in Parliament. India was a part of the fragile five. Today he regards the world's the fastest growing major economy as disastrous," Jaitley had said.
With PTI inputs