Govt may allow cooperative banks to lend under MSME credit guarantee scheme
- ECLGS was announced as a part of the government’s ₹20 trillion financial package to help the poor and small businesses tide over the covid-19 crisis, by providing them additional funding of up to ₹3 trillion in the form of a fully guaranteed emergency credit line
NEW DELHI: The government may include cooperative banks as a lending institution under the emergency credit line guarantee scheme (ECLGS) that was announced to support stressed micro, small and medium enterprises (MSME).
MSME minister Nitin Gadkari said the finance minister will take a decision in this regard soon.
“The finance minister has explained that due to the dual regulation and supervision, cooperative banks are not included as member lending institutions (MLIs) under ECLGS. However, data regarding their financial position is being collected from scheduled state cooperative banks and urban cooperative bank to include them as MLIs under the scheme, in consultation with the Reserve Bank of India, depending on availability on headroom of the scheme,” Gadkari said at the MSME Conclave organized by FICCI Karnataka State Council.
Currently, all public sector banks and private sector banks and non-banking financial companies (NBFCs) have been extending loans under ECLGS.
ECLGS was announced as a part of the government’s ₹20 trillion financial package to help the poor and small businesses tide over the covid-19 crisis, by providing them additional funding of up to ₹3 trillion in the form of a fully guaranteed emergency credit line.
“The main objective of the Scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs) to increase access to, and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the covid-19 crisis by providing them 100% guarantee for any losses suffered by them due to non-repayment of the GECL (guaranteed emergency credit line) funding by borrowers,” according to an official statement released by the government in May.
Gadkari said since disbursement at the moment is only ₹1.2 trillion, as compared to the target of ₹3 trillion, cooperative banks can be allowed to lender under the scheme.
Cooperative institutions play a crucial role in financial inclusion in both rural and urban areas. According to an RBI report, there were 1,551 urban cooperative banks as on 31 March 2018, and 96,612 rural cooperative banks as on 31 March 2017, with the latter accounting for 65.8% of the total asset size of all cooperative banks.
As far as the issue of problem of delayed payments to MSMEs is concerned, the minister said that he has urged all ministries, departments and state-owned companies to clear pending bills of MSMEs within 45 days and the union MSME ministry is closely monitoring the complaints lodged on digital portal--SAMADHAN.
Catch all the Business News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:10 Aug 2020, 04:08 PM IST
- Top Gainers
- Top Losers
- 52 Week High