On May 20, 2020, the Union Cabinet has approved the Emergency Credit Line Guarantee Scheme (“Scheme”), under which, 100% guarantee coverage is to 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, in the form of a Guaranteed Emergency Credit Line (GECL) facility.
For this purpose, the Government of India shall provide a corpus of Rs.41,600 crore spread over the current and the next three financial years.
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.3,00,000 crore is sanctioned under the GECL, whichever is earlier.
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 funding by borrowers.
The salient features of the Scheme include:
All MSME borrower accounts with outstanding credit of up to Rs.25 crore as on February 29, 2020 which were less than or equal to 60 days past due as on that date, i.e., regular, SMA 0 and SMA 1 accounts, and with an annual turnover of up to Rs.100 crore would be eligible.
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% 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% 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.
No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs).
Interest rates shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.