Government Extends Emergency Credit Line Guarantee Scheme for MSME by 1 month

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Government Extends Emergency Credit Line Guarantee Scheme

NEW DELHI: The government of India has decided to extend the Emergency Credit Line Guarantee Scheme for MSME by 1 month since they haven’t reached the target which was aimed at 3 Lakh Crore. On Monday, the 30th of October, they have announced the extension by 1 month. 

Initially, the Emergency Credit Line Guarantee Scheme was only valid till the end of October 2020.  The Scheme was actually launched as a part of the Aatmanirbhar Bharat Abhiyan Package which was announced by Nirmal Sitharaman. This Scheme was launched in the month of May so it could help to migrate the distress caused by the Covid-19 induced lockdown period by providing credit to various sectors that included micro, small, medium enterprises which are known as MSMEs.

As announced on Monday, now the scheme is valid till the 30th of November invariably or till the time that it takes to reach the target of 3 Lakh crore that was sanctioned under the scheme said by the finance minister, or whichever would be the earliest to the reach the target, she added. This step was initiated so that it would help give opportunities to the opening up of different sectors in the economy, considering the festive season. Hence, the extension will help a lot of borrowers to avail the credit line scheme if they have not taken it so far.  

According to the sources and date which was uploaded on ECLGS portal by a member, it says that that an amount of 1.48 Lakh Crore is still disbursed which means it can be sanctioned to the new borrowers. And a whole total of 2.03 Lakh Crore has been sanctioned under the scheme so far.

This scheme provides a non-collateral, fully guaranteed credit to the MSME’s, business enterprises. Individual loans are granted for business purposes. And, an extent of 20% of the credit outstanding for MUDRA burrowers as dated on 29th February. This scheme is exclusively eligible for the burrowers who has credit outstanding up to Rs 50 Crore and with annual turnover that is up to Rs 250 Crore.

The other details about the scheme are, a tenure of four years is provided under the scheme which includes one year of moratorium on principle repayment. The interest rates are decided at 9.25% for banks and Financial Institutions (FIs) and a 4% for the non-banking financial companies (NBFC’s).

 Reports say that less than a quarter of funds were disbursed to stressed NBFC’s and hence an amount of Rs 30,000 crore special liquidity scheme was closed. From the approved that were seeking Rs 11,120 crore, an amount of Rs 3,707 crore lapsed on 30th of September as the scheme ended.

The government of India also widened its scope and granted Rs 3 Lakh crore ECLGS scheme just by doubling the upper ceiling of loans outstanding which also included certain loans that were beneficially given to doctors, lawyers and chartered accounts for their business purposes as dated on August 1.

The scheme also worked to benefit more companies so they increased the upper ceiling of loans outstanding that remain eligible under the scheme of 25 crore to 50 crores, as dated on February 29.

And hence, the maximum amount for the Guaranteed Emergency Credit Line (GECL) funding under the scheme has been increased from 5 crore to 6 crores respectively. 

As a consequence of the coronavirus pandemic, the government announced Rs 20 Lakh Crore economic package under the scheme which was later tweaked to make it applicable to the companies which made an annual turnover of about Rs 250 crore which was earlier Rs 100 crore. 

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The banks and the NFBC’s have approved loans which stood at the worth at about Rs 1,87,679 Lakh crore and the disbursed stood at Rs 1,36,140 crore as on October 5.

The cabinet also approved an additional fund of up to Rs 3 Lakh crore on the 20th of May with a concessional rate of 9.25% through ECLGS for the MSME sector.

This scheme provides a 100% guaranteed coverage by the National Credit Guarantee Trustee Company (NCGTC) which includes additional funding of up to Rs 3 Lakh crore to all the eligible MSME’s and also to Micro Units Development and Refinance Agency (MUDRA) borrowers in the form of GECL facility.

The scheme is applicable to all the loans that are sanctioned under the GECL facility that are dated from the date of announcement until 31st of October or until the target of Rs 3 Lakh crore is reached or sanctioned under the GECL or whichever would be the earliest. 

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