Banks are likely to follow the State Bank of India (SBI) in announcing ad-hoc facilities to provide relief to borrowers whose operations are impacted by the Covid-19 outbreak.

India’s largest bank has introduced a Covid-19 Emergency Credit Line (CECL) by way of a standby line of credit (SLC) of 12-month tenure at an interest rate of 7.25 per cent (fixed).

The SBI will give 10 per cent of a borrower’s existing fund based working capital limits (FBWC) as loan. The maximum loan amount that the SBI will give under the CECL is ₹200 crore.

The SBI said the purpose of the CECL, which will be in force up to June 30, ,is to meet the temporary liquidity mismatch arising out of Covid-19.

In a circular, the SBI said all standard accounts which have not been classified as Special Mention Account (SMA)-1 (whereby principal or interest payment or any other amount is wholly or partly overdue between 31-60 days) or SMA-2 (61-90 days) as on March 16, 2020 and till the date of sanction, are eligible for CECL.

The SBI said existing customers who have availed special loan products like “SME Assist”, “SLC for MSME” and “SLC for GST Input Credit”etc are also eligible for the facility. However, total additional exposure, including the present facility, should not exceed 25 per cent of the FBWC exposure.

The bank said the borrower can avail the sanctioned amount in one go. The facility will be considered as an exposure on the borrower and guidelines stipulated under the RBI Prudential Norms and market mechanisms will be adhered to.

The SBI will not take any margin under the CECL. However, the proposed ad-hoc limits should be covered by the market value of the stocks and receivables as per the Stock statement.

Cover period of receivables may be extended by a maximum of three months till closure of the facility. Extension of charges will be on the Primary Security/Collateral Security.

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