New Delhi, Jul 1 (IANS): The World Bank's Board of Executive Directors has approved a $750 million MSME Emergency Response program to support increased flow of finance into the hands of India's micro, small, and medium enterprises (MSMEs), severely impacted by the COVID-19 crisis.

The MSME Emergency Response program will address the immediate liquidity and credit needs of some 15 lakh viable MSMEs to help them withstand the impact of the current shock and protect millions of jobs, a World Bank statement said.

"This is the first step among a broader set of reforms that are needed to propel the MSME sector over time," it said.

The $750 million loan from the International Bank for Reconstruction and Development (IBRD), has a maturity of 19 years including a 5-year grace period.

The statement said that the World Bank Group, including its private sector arm - the International Finance Corporation (IFC), will support the government's initiatives to protect the MSME sector by unlocking liquidity and strengthening NBFCs and small finance banks and enabling financial innovations.

This program will support the government's efforts to channel liquidity to the MSME sector by de-risking lending from banks and Non-Banking Financial Companies (NBFCs) to MSMEs through a range of instruments, including credit guarantees.

The initiative will also support the government's refinance facility for NBFCs. In parallel, the IFC is also providing direct support to SFBs through loans and equity, it added.

"The MSME sector is central to India's growth and job creation and will be key to the pace of India's economic recovery, post COVID-19. The immediate need is to ensure that the liquidity infused into the system by the government is accessed by MSMEs," said Junaid Ahmad, World Bank Country Director in India.

He added that the overall financing ecosystem for MSMEs also needs to be strengthened.

"This operation seeks to achieve both these objectives by furthering the role of NBFCs and SCBs as effective financial intermediaries and leveraging fintech to broaden the reach of finance into the MSME sector," Ahmad said.

The World Bank has so far committed $2.75 billion to support India's emergency COVID-19 response, including the new MSME project.