Cabinet approves Rs 3 lakh cr emergency credit line for MSME; loans at 9.25% rate


NEW DELHI: The Union Cabinet on Wednesday accredited further funding of as much as Rs 3 lakh crore at a concessional rate of 9.25 per cent by the Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector hit laborious by the coronavirus disaster. The ECLGS was the second-biggest part of Rs 21 lakh crore complete bundle introduced by Finance Minister Nirmala Sitharaman final week.
Under the scheme, 100 per cent assure protection shall be supplied by National Credit Guarantee Trustee Company (NCGTC)for further funding of as much as Rs 3 lakh crore to eligible MSMEs and MUDRA debtors, within the type of a assured emergency credit line (GECL) facility, an official assertion stated.

For this goal, a corpus of Rs 41,600 crore shall be supplied by the Government of India unfold over the present and the following three monetary years, it stated.

The Cabinet headed by Prime Minister Narendra Modi additionally accredited that the scheme could be relevant to all loans sanctioned below GECL Facility in the course of the interval from the date of announcement of the scheme to October 31 or until an quantity of Rs 3 lakh crore crore is sanctioned below the GECL, whichever is earlier.

The ECLGS has been formulated as a particular response to the unprecedented state of affairs brought on by COVID-19 and the resultant lockdown, which has severely impacted manufacturing and different actions within the MSME sector, the discharge stated.

The scheme goals at mitigating the financial misery being confronted by about 45 lakh MSMEs by offering them further funding of as much as Rs 3 lakh crore within the type of a totally assured emergency credit line.

The most important goal of the scheme is to supply an incentive to member lending establishments (MLIs) like banks, financial institutions (FIs) and non-banking monetary corporations (NBFCs) to extend entry to, and allow availability of further funding facility to MSME debtors, in view of the financial misery brought on by the COVID-19 disaster, by offering them 100 per cent assure for any losses suffered by them on account of non-repayment of the GECL funding by debtors.

With regard to eligibility, it stated, all MSME borrower accounts with excellent credit of as much as Rs 25 crore as on February 29 which had been lower than or equal to 60 days overdue as on that date, i.e., common, SMA zero and SMA 1 accounts, and with an annual turnover of as much as Rs 100 crore could be eligible for GECL funding below the Scheme.

The quantity of GECL funding to eligible MSME debtors both within the type of further working capital time period loans (in case of banks and FIs), or further time period loans (in case of NBFCs) could be as much as 20 per cent of their complete excellent credit as much as Rs. 25 crore as on February 29, 2020.

The complete funding supplied below GECL shall be supplied with a 100 per cent credit assure by NCGTC to MLIs below ECLGS, it stated, including, tenor of mortgage below Scheme shall be 4 years with moratorium interval of 1 yr on the principal quantity.

No Guarantee Fee shall be charged by NCGTC from the member Lending Institutions (MLIs) below the scheme and rates of interest below the scheme shall be capped at 9.25 per cent for banks and FIs, and at 14 per cent for NBFCs.

In view of the important function of the MSME sector within the financial system and in offering employment, the proposed scheme is predicted to supply a lot wanted aid to the sector by incentivising MLIs to supply further credit of as much as Rs 3 lakh crore to the sector at low value, thereby enabling MSMEs to satisfy their operational liabilities and restart their companies, it stated.

By supporting MSMEs to proceed functioning in the course of the present unprecedented state of affairs, the scheme can also be anticipated to have a constructive influence on the financial system and help its revival, it added.

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