Finance Minister Nirmala Sitharaman said on Monday that banks had authorized Rs 75,426 crore working capital loans under the Rs 3 lakh-crore emergency line of credit guarantee program ( ECLGS) for MSMEs, of which Rs 32,895 crore has already been disbursed.
The program, under which the government provides a full guarantee of up to 20% of additional loans and without a working capital guarantee, was put in place from June 1 to alleviate the blow to epidemic-stricken MSMEs of Covid-19.
Bankers say disbursements are increasing as restrictions on foreclosure on business takeovers have been relaxed in the past three weeks. Data is based on reports from 16 private banks and all 12 PSBs.
The minister’s office said in a tweet that loans of Rs 42,739 crore were sanctioned by public sector banks (PSBs) and Rs 32,687 crore by private lenders. Likewise, while the PSBs disbursed Rs 22,198 crore, private banks released Rs 10,697 crore.
The program was an important part of the government’s Rs.21 lakh-crore relief program to help individuals and businesses weather the impact of the pandemic. The government has allocated a corpus of Rs 41,600 crore during the current fiscal year and the next three fiscal years to implement this loan guarantee program.
Borrowers with up to Rs 25 crore in circulation as of February 29 and an annual turnover of Rs 100 crore will be eligible. These loans will have a term of 4 years with a 12-month moratorium on principal repayment. The interest rate will be capped at 9.25% per year for banks and financial institutions and 14% for non-financial banking corporations.
The program can be operated until October 31 or until the limit of Rs 3-lakh-crore is exhausted, whichever comes first. Up to 45 lakh units can resume commercial activities and save jobs, the government recently announced.
The program also aims to support stressed MSME borrowers who are not in default. So, borrowers with standard accounts (with timely repayment), SMA-0 (with delays up to 30 days) and SMA-1 (with delays up to 60 days) can also take advantage of this scheme.
Borrowers interested in the Mudra program, which supports budding entrepreneurs from vulnerable sections of society, will also be covered by the secured emergency line of credit.