Government extends emergency credit line guarantee program for MSMEs by one month
The scheme was valid until the end of October. It was launched as part of the Aatmanirbhar Bharat Abhiyan package announced by Finance Minister Nirmala Sitharaman in May to alleviate the distress caused by the coronavirus-induced lockdown, by providing credit to different sectors, especially micro, small and medium-sized enterprises (MSMEs).
The program has been extended until November 30 or until an amount of Rs 3 lakh crore is sanctioned under the program, whichever comes first, the finance ministry said in a statement. The step was taken given the opening of various sectors of the economy and the expected increase in demand during the current holiday season.
“This extension will provide a new opportunity for those borrowers who have not yet taken advantage of the program to obtain credit under the program,” he said.
According to data uploaded by member credit institutions on the ECLGS portal, an amount of Rs 2.03 lakh crore has been sanctioned under the program at 60.67 lakh borrowers so far, while an amount of Rs 1.48 lakh crore has been disbursed.
Under this program, additional fully secured and unsecured credit to MSMEs, enterprises, individual business loans and MUDRA borrowers is granted up to 20% of their outstanding credit as of February 29, 2020.
Borrowers with outstanding credit of up to Rs 50 crore as of February 29 and with an annual turnover of up to Rs 250 crore are eligible for the program.
Interest rates under the scheme are capped at 9.25 percent for banks and financial institutions (FIs) and 14 percent for non-bank financial corporations (NBFC).
The duration of loans granted under the mechanism is four years, including a one-year moratorium on repayment in principle.
A special Rs 30,000 crore liquidity program was closed on the due date as even less than a quarter of the funds were disbursed to troubled NBFCs.
Approximately Rs 7,227 crore was paid to NBFC from approved applications worth Rs 11,120 crore – received from 39 proposals – from non-bank lenders by the special entity created for this purpose. The program started July 1 and ended September 30, 2020.
Of the approved requests for Rs 11,120 crore, Rs 3,707 crore expired at the end of the program on September 30.
On August 1, the government expanded the scope of the crore-ECLGS program to Rs 3 lakh by doubling the upper limit on outstanding loans and including certain loans to professionals like doctors, lawyers and chartered accountants for purposes commercial.
To ensure that more businesses benefit from the program, it was decided to increase the upper limit on outstanding loans as of February 29 to be eligible for the program from Rs 25 crore to Rs 50 crore.
The maximum amount of guaranteed emergency credit line (GECL) funding under the program has been increased accordingly from Rs 5 crore to Rs 10 crore.
Announced as part of the government economic program of Rs 20 crore in the wake of the coronavirus pandemic, the program was later amended to be made applicable to companies with an annual turnover of Rs 250 crore over the threshold prior to Rs 100 crore.
Banks and NBFCs approved loans worth around Rs.187,579 crore, while disbursements stood at Rs.136,140 crore as of October 5.
On May 20, Cabinet approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25% through ECLGS for the MSME sector.
Under this program, 100% guarantee coverage will be provided by the National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested borrowers from the Agency. development and refinancing of micro-units (MUDRA) in the form of the GECL installation.
The scheme will be applicable to all loans sanctioned under the GECL facility during the period from the date of the scheme’s announcement to October 31 or until the amount of Rs 3 lakh crore is sanctioned under GECL, whichever comes first.