NEW DELHI: The Union Cabinet on Wednesday approved the Rs 3 lakh crore additional funding to eligible MSMEs under the Emergency Credit Line Guarantee Scheme (ECLGS), and the special liquidity scheme for NBFCs, both of which were announced by the Finance Minister under the government’s Aatma Nirbhar Bharat Scheme.
Under the scheme, banks and financial institutions and NBFCs will be provided with complete guarantee cover by the National Credit Guarantee Trustee Company Ltd for giving loans to MSMEs in the form of a Guaranteed Emergency Credit Line (GECL) facility.
The government will provide a corpus of Rs 41,600 crore for the scheme over the current and coming three financial years.Under the ECLGS scheme, MSMEs with outstanding credit of up to Rs 25 crore and with an annual turnover of up to Rs 100 crore as on February 29, 2020, would be eligible for GECL funding. The loan tenor will be four years with one-year moratorium on principal amount.
The interest rate for loans given under the scheme will be capped at 9.25 per cent for banks and financial institutions, and at 14 per cent for NBFCs. The scheme would be applicable to all loans sanctioned under GECL from the date of its announcement till October 31, 2020, or till it reaches Rs 3 lakh crore, whichever is earlier.
The Cabinet also approved partial credit guarantee scheme for public sector banks to buy Commercial Papers (CP) with AA and below ratings.
As per the modification, NBFCs/HFCs, which were reported under Special Mention Account-1 category on technical reasons alone during the one year prior to August 1, 2018, will be eligible for benefit under the scheme.
Post the modification, the scheme will be extended to bonds or CPs issued by NBFCs, HFCs and MFIs, whereby the Centre would provide the sovereign portfolio guarantee of up to 20 per cent of first loss for purchase of bonds or CPs issued by the financial institutions.