Home >Industry >Banking >Over 3,800 crore disbursed under emergency credit line guarantee scheme: Govt
The Union budget has proposed to apply the 25% corporate tax rate to all MSMEs—a good move which will support the employment creating end of industry and thus encourage job creation. Photo: HT
The Union budget has proposed to apply the 25% corporate tax rate to all MSMEs—a good move which will support the employment creating end of industry and thus encourage job creation. Photo: HT

Over 3,800 crore disbursed under emergency credit line guarantee scheme: Govt

  • The collateral-free loans are expected to help MSMEs pay salaries, rent and with restocking expenses
  • Under the scheme, interest rates capped at 9.25% for banks and at 14% for non-banking financial companies

NEW DELHI: State-owned lenders have sanctioned loans worth 10,362 crore under the recently announced emergency credit line guarantee scheme, of which a little over a third has been disbursed.

“Public sector banks have already sanctioned loans worth 10,361.75 crore under the 100% Emergency Credit Line Guarantee Scheme. Out of this, 3,892.78 crore has already been disbursed," finance minster Nirmala Sitharaman’s office said in a tweet.

Last month, Sitharaman had announced an emergency credit line guarantee scheme (ECLGS)--a key proposal in the government’s 20 trillion financial package-- to help the poor, and small businesses tide over the covid-19 crisis. The collateral-free loans are expected to help micro, small and medium enterprises (MSMEs) pay salaries, rent and with restocking expenses.

The scheme incentives banks, and non-bank lenders to offer additional funding facility to small borrowers by providing them 100% guarantee for any losses suffered by lenders due defaults, with the larger idea to support small businesses struggling to meet their operational liabilities because of the lockdown.

Under the scheme, interest rates capped at 9.25% for banks and at 14% for non-banking financial companies (NBFCs). It will cover only existing borrowers with outstanding credit limit of up to 25 crore as on 29 February, and having a turnover of up to 100 crore. The tenor of the loan under the scheme will be four years, with a moratorium of one year on the principal amount. It will also include borrowers with up to 60 days past dues and cover working capital and term loan facilities

The scheme is valid till October 31.

Experts said while the government guarantee will support lenders dealing with high credit risk profiles, the effectiveness of the scheme will depend on whether small businesses are in a position to borrow and how the loan is utlilised.

“The fact that credit disbursals have begun is a good sign. It will ensure that the ecosystem is up and running. However, it may not necessarily indicate revival of demand as economic activity is yet to pick up," Kuntal Sur, partner and leader at PwC India said.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

Close
×
My Reads Logout