Cabinet approves additional funding of Rs 3 lakh cr for MSMEs, MUDRA borrowers through ECLG Scheme
May 20, 2020
New Delhi [India], May 20 : The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved to enable additional funding of up to Rs 3 lakh crore to eligible Micro, Small and Medium Enterprises (MSMEs) and interested Micro Units Development and Refinance Agency Bank (MUDRA) borrowers.
"The Union Cabinet has given approval to enable additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested MUDRA borrowers by way of Emergency Credit Line Guarantee Scheme," the Cabinet said in an official statement on Wednesday.
It said that under the scheme, 100 per cent guarantee coverage will be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
For this purpose, corpus of Rs 41,600 crore shall be provided by Government of India spread over the current and the next three financial years.
The Cabinet also approved that the scheme would be applicable to all loans sanctioned under GECL facility during the period from the date of announcement of the Scheme to October 31, 2020, or till an amount of Rs 3 lakh crore is sanctioned under the GECL, whichever is earlier.
"The Emergency Credit Line Guarantee Scheme (ECLGS) has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector," the statement said.
"The Scheme aims at mitigating the economic distress being faced by MSMEs by providing them additional funding of up to Rs 3 lakh crore in the form of a fully guaranteed emergency credit line," it added.
It said that the objective of the scheme is to provide an incentive to Member Lending Institutions (MLIs), like 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.
All MSME borrower accounts with outstanding credit of up to Rs 25 crore as on March 29, 2020, which were less than or equal to 60 days past due as on that date, like, regular, SMA 0 and SMA 1 accounts, and with an annual turnover of up to Rs 100 crore would be eligible for GECL funding under the scheme.
The amount of GECL funding to eligible MSME borrowers either in the form of additional working capital term loans (in case of banks and FIs), or additional term loans (in case of NBFCs) would be up to 20 per cent of their entire outstanding credit up to Rs 25 crore as on February 29, 2020.
"The entire funding provided under GECL shall be provided with a 100 per cent credit guarantee by NCGTC to MLIs under ECLGS. Tenor of loan under Scheme shall be four years with moratorium period of one year on the principal amount," the statement said.
"No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme. Interest rates under the Scheme shall be capped at 9.25 per cent for banks and FIs, and at 14 per cent for NBFCs," it added.
