The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given the following approvals:
To enable additional funding of up to Rs. three lakh crore to eligible MSMEs and interested MUDRA borrowers by way of “Emergency Credit Line Guarantee Scheme (ECLGS).”
Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. three lakh crore to eligible MSMEs and interested MUDRA. borrowers, in the form of a Guaranteed Emergency Credit Line (GECL) facility.
For this purpose, corpus of Rs. 41,600 crore shall be provided by Government of India spread over the current and the next three financial years.
The Cabinet also approved that the Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020, or till an amount of Rs 3,00,000 crore is sanctioned under the GECL, whichever is earlier.
The Emergency Credit Line Guarantee Scheme (ECLGS) has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.
The main objective of the Scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs) to increase access to, and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by providing them 100 per cent guarantee for any losses suffered by them due to non repayment of the GECL funding by borrowers.
The salient features of the Scheme include –
1. All MSME borrower accounts with outstanding credit of up to Rs. 25 crore as on 29.2.2020 which were less than or equal to 60 days past due as on that date, i.e., regular, SMA 0 and SMA 1 accounts, and with an annual turnover of up to Rs. 100 crore would be eligible for GECL funding under the Scheme.
2. The amount of GECL funding to eligible MSME borrowers either in the form of additional working capital term loans (in case of banks and FIs), or additional term loans (in case of NBFCs) would be up to 20% of their entire outstanding credit up to Rs. 25 crore as on 29th February, 2020.
3. The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
4. Tenor of loan under Scheme shall be four years with moratorium period of one year on the principal amount.
5. No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
6. Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.
The Scheme would be applicable to all loans sanctioned under GECL during the period from the date of announcement of the Scheme to 31.10.2020, or till an amount of Rs three lakh crore is sanctioned under the GECL, whichever is earlier.
Now the bankers are not happy with the above scheme as the guarantee for credit guarantee scheme for micro, small and medium enterprise is not being offered by the government, but from the credit guarantee trust fund for micro and small enterprises (CGTMSE).
The reason for same has been offered by a PSB head as “We were expecting the guarantee on loans to come from the government of India, but it has come from CGTMSE instead of being a sovereign guarantee, CGTMSE has its caveats..it does not give you the full money, which is lost,”
Now let’s see how the loan will be distributed and whether the actual people get’s it’s benefit or not.
To read full press release CLICK HERE.
This article is just for information purpose and are personal views of the author. It is always advisable to hire a professional for practical execution or you can mail us. If you need assistance you can ask a question to our expert and get the answer within an hour or post a comment about your views on the post and also subscribe to our newsletter for latest weekly updates.
