Emergency Guaranteed Credit limit raised; MSMEs, businesses up to ₹250 cr turnover can avail credit

The Centre on Saturday announced expanding the Emergency Credit Line Guarantee Scheme (ECLGS) by raising the turnover limit for eligibility and credit limit. Also, individuals and professional taking loan for businesses will also get benefit from this scheme.

“Now, businesses/MSME (Micro, Small and Medium Enterprises) with turnover up to ₹250 crore will get credit under the scheme,” Financial Services Secretary Debashish Panda said here while giving details in the presence of Finance Minister Nirmala Sitharaman. There are two changes also. First, maximum possible loan under the scheme has been doubled to ₹10 crore. Second, individual loans given for business purposed have also been brought under the scheme.

The scheme provides a loan for which 100 per cent guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs). It will be extended in the form of additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs), to eligible MSMEs, other Business Enterprises and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers.

Earlier, it was said that credit under the scheme would be up to 20 per cent of the borrower’s total outstanding credit up to ₹25 crore, as on February 29, 2020. Now, this ceiling has been changed to ₹50 crore which means loan up to ₹10 crore will be given. There is no change in other conditions such as moratorium period of one year on the principal amount. Interest will, however, be payable during the moratorium period. The principal shall be repaid in 36 instalments after the moratorium period is over.

Sitharaman expects changes to expand the ambit of scheme to make an additional amount of more than ₹1 lakh crore eligible under the scheme. However, the original funding target of ₹3 lakh crore will not change. As on date, various banks and NBFCs have sanctioned over Rs 1.37 lakh crore out of which nearly ₹88,000 crore has been disbursed. The scheme, so far, has benefited nearly 40 lakh businesses including MSMEs. The scheme is available till October 31.

Talking about other schemes, announced along with ECLGS, Panda informed that so far 1.12 crore farmers have been given PM Kisan Credit card with each one has a credit limit of ₹90,000. Under this initiative, the Government intends to extend concessional credit amounting ₹2 lakh crore to 2.5 crore farmers through Kisan credit card.

Under the scheme of subordinate debt for NPA/stressed MSMEs, Panda said most of the bank boards have approved contours of the scheme. Now, branches will be communicated about the scheme on Monday. Under the scheme the government has set aside ₹20,000 crore as subordinate debt to help about two lakh MSMEs with stressed accounts or non-performing assets (NPA). Here, promoters of the MSME will be given debt, which will then be infused as equity in the unit. However, unlike credit guarantees, government support in this scheme is not full but partial.

He mentioned that the scheme to provide liquidity support to Non-Banking Finance Companies (NBFCs) and Housing Finance Companies has given good results. Commercial papers (CPs) and Non-convertible debenture (NCD) (even of AA rated or below) amounting ₹18,000 crore. have been purchased and process is on to buy further these papers amounting ₹5,800 crore.

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