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From about 70 million small enterprises in India, only 4% have access to bank credit or loans, says Praveen Khandelwal, secretary general of the Confederation of All India Traders. And, as India is few weeks short of General Elections that will decide the next Prime Minister of the country, the Indian government run by Modi’s Bharatiya Janata Party (BJP) is mulling over offering cheap loans and free accidental insurance coverage to millions of small businesses in India, said a report by Reuters, citing two government sources with direct knowledge of the matter.

“Small business groups have been critical of the Modi government in the past year after many firms were squeezed by a shock move to ban high-value currency notes in 2016, followed by a hasty implementation of a nation-wide goods and services tax (GST) that raised their compliance costs,” said the report.

According the report, if the plan implemented to reality then small businesses in India would get a discount of 2 percentage points on loans for businesses with annual sales of less than 50 million rupees ($701,754) and would compensate banks for costs. Small businesses with a top credit rating can get loans from banks at about 9-10%, while lower-rated businesses can be charged around 13-14%.

The government has not yet decided if the moves would be announced before the interim budget on Feb. 1.

The report also suggests that to ensure greater availability of loans to small businesses and increasing the credit flow to them, the government may also ask banks to open a special window for them.

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The government is also planning to provide free accidental insurance coverage of up to 10 lakhs rupees to small businesses with annual sales of up to 10 core rupees. Additionally, employees of small traders may also get discounts on opting for state-backed insurance schemes.

In May last year, finance ministry has also tied up with 40 firms including Amazon and Flipkart, in order to facilitate easy loans to small entrepreneurs under the Pradhan Mantri Mudra Yojana (PMMY).

A couple of months back, Small Industries Development Bank of India (Sidbi) has launched an online marketplace to enable In-Principle approval for MSME loans up to INR 1 Crore from Public Sector Banks and has reduced the loan processing turnaround time from 20-25 days to just 59 minutes.

In the same month, India’s Agriculture Ministry announced the launch of a credit scheme called ‘Yuva Sahakar-Cooperative Enterprise Support and Innovation Scheme‘ that aims to provide cheaper loans to startups in the cooperative sector and those having innovative projects costing up to Rs 3 crore.

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