The Finance Ministry expects the majority of the targeted businesses — including micro, small & medium enterprises (MSMEs) — to avail the Guaranteed Emergency Credit Line (GECL) in June itself.

The scheme is aimed to benefit 45 lakh businesses, out of which 1.5 lakh have already applied. It is operational till October 31 or till an amount of ₹3-lakh crore is sanctioned, whichever is earlier.

The scheme, announced as part of the Aatmanirbhar Bharat package, intends to provide guaranteed loans of up to ₹3-lakh crore to businesses with a turnover of up to ₹100 crore and loan outstanding of up to ₹25 crore as on February 29, 2020. Up to 20 per cent of the outstanding will be provided as a new term loan. Though the rate of interest has been capped at 9.25 per cent for banks and financial institutions and 14 per cent for NBFCs, public sector banks have agreed to offer 7.5 per cent.

Banks reaching out

A senior Finance Ministry official said that as on date, the total loan sanctioned is approximately ₹13,500 crore, while over ₹6,000 crore has been disbursed. “It is not a scheme for which someone has to apply. It is a pre-approved one — you have to say no to opt out. Banks are reaching out to all eligible borrowers,” he said, adding that though the scheme is operational till October, the expectation is that it will reach the peak this month itself.

The scheme offers a one-year moratorium on the principle, but interest is payable during the period. The principle is to be repaid in 36 instalments once the moratorium period is over. According to the guidelines issued by the National Credit Guarantee Trustee Company Ltd, not only MSMEs, but also other businesses that fulfil the eligibility criteria can avail credit.

Under the scheme, banks/NBFCs can offer GECL of up to 20 per cent of the borrower’s total outstanding credit. The actual loan extended can, therefore, be less than 20 per cent of the total. While the bank/NBFC is expected to be liberal in sanctioning such loans, it is also expected to evaluate credit proposals by using prudent judgment and discretion/due diligence, the guidelines say. A business does not need to be registered as an MSME to get the credit.

This scheme also includes MUDRA borrowers, who can get credit up to ₹5 crore. GST registration is mandatory for borrowers except for those for whom it’s not required. A separate loan account is opened for the borrower for extending additional credit under GECL. The tenor of the loans is four years from the date of disbursement. No pre-payment penalty will, however, be charged in case of early repayment.

The government has provided a corpus of ₹41,600 crore for the scheme, which will be spread over four years starting with the current fiscal. According to the guidelines, MSMEs or businesses constituted as proprietorship, partnership, registered company, trusts and limited liability partnerships (LLPs) are eligible under the scheme.

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