Atmanirbhar Bharat Package: Phase 1 Details of Rs 20 Lakh Crore Relief Package

The announcements were in continuation of earlier measures that were announced by the Finance Minister and RBI in April.

Let’s look at the major announcements from the list

First, financial support for the MSME sector

  1. The government will facilitate collateral-free loans of a whopping  Rs 3 lakh crore to businesses including MSMEs. These loans will be for a four-year period and the borrowers won’t have to pay the principal amount for 12 months. The government will be the guarantor for these loans to be disbursed by banks and NBFCs. This measure will help the companies get the cash needed to restart businesses after lockdown.
  2. The government would infuse Rs 50,000 crore in the MSME sector through equity investments in them via a Fund of Funds. This investment will be in companies with growth potential and sustainable business models.
  3. To support Make in India, government procurement tenders of up to Rs 200 crore will not be global tenders. That means foreign companies will not be allowed to bid for them. This will give a fillip to PM’s call for self reliant India. 

Second, relief for the taxpayers and employers

Next set of measures are related to EPF. The EPF contribution that employers and employees make every month has been reduced from 12 percent to 10 percent for the next three months. This will mean, your take home salary will increase for the next three months. Further, your employer will have a lesser burden. This is expected to provide a total of Rs 6,750 crore in hands of employers and employees.

Third, liquidity boost to NBFCs, HFCs and MFI

The third set of measures are for NBFCs, HFIs and MFIs. Here is what was announced.

  1. The government will provide liquidity of Rs 30,000 crore to NBFC, HFCs, and MFIs by investing in investment-grade debt papers of companies. This will support the measures of RBI to provide liquidity. It will help these companies and also mutual fund companies as there will be a buyer for the papers these mutual funds hold. This is significant for investors in medium-to-long term debt mutual fund schemes. It will turn their investments in funds where lower grade papers have been bought would have a liquidity cushion and support the bond prices.
  2. The government has also come in support of companies with a low credit rating. These companies require money so they can lend. So, the government has announced a Rs 45,000 crore Partial Credit Guarantee Scheme. In case there is a loss, the first 20 percent of the loss will be borne by the government of India. Companies with Credit Ratings of AA and below, even the unrated papers will be eligible for investment. This will increase the risk appetite amongst the lenders as they see their losses actually pared if the borrowing companies default. Read this, as companies that would have relatively struggled or seen delay in their loan approvals – would now get relatively faster approvals.

Four, financial aid to power distribution companies

The next measure is for DISCOMs. The government will give Rs 90,000 crore to the DISCOMs against their receivables, so they can pay for the power they have purchased. The money will be guaranteed by the respective states.

Five, deadline extended for real estate project

The next set of measures are aimed to provide relief to the real estate sector.

  1. All deadlines for work being done by contractors for central agencies like railways will be extended by six months without any penalty to contractors. The government will also release bank guarantees to the extent of the contract completed to ease cash flows.
  2. To de-stress real estate developers, the Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to treat COVID-19 as an act of God under RERA. And hence asked them to extend the completion date of projects expiring on or after March 25, 2020, by another six month.

Six, a relief direct taxes

TDS rate has been cut by 25 percent for non-salaried payments. So payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc shall be eligible for this reduced rate of TDS. So if you have an FD or get a dividend or are a freelancer, you will have more money hitting your account. This reduction will be for the remaining part of the FY 2020-21, i.e. from today to March 31, 2021

While there a few more announcements like all pending refunds to charitable trusts and non corporate businesses professions including proprietorship, partnership, LLP and cooperatives shall be issued immediately and due date extension for income-tax return filing. These were the major ones.


These measures are primarily aimed to increase liquidity and ensure that there is flow of credit to companies who need loans.