Government unlikely to continue credit guarantee scheme for MSMEs beyond October 2020

Government is not likely to continue the Rs. 3, lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for Micro, Small and Medium Enterprises (MSME) sector beyond October, according to PTI sources.

In May, the cabinet had announced an ECLGS scheme of Rs. 3 lakh crore on a concessional rate of 9.25 per cent intended to render financial support to MSME business impacted by the pandemic might not be extended beyond this month, even though the sanctioned amount is roughly 65 percent of the actual amount. 

Under the scheme, 100 percent guarantee coverage will be provided by the National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers in the form of GECL facility.

The scheme applies to all loans sanctioned under Guaranteed Emergency Credit Line (GECL) facility during the period from the date of announcement of the Scheme to October 31 or till the amount of Rs 3 lakh crore is sanctioned, whichever is earlier. 

PTI reported through it’s sources that the purpose of rendering loan assistance was to help the sector hit due to the ongoing pandemic. Even though there is some room left but if there are no takers for the scheme, there is no need to prolong the scheme.

On August 1, the Govt. had broadened the scope of the Rs 3 lakh crore-scheme by doubling the upper ceiling of loans balances, including specific loans given to professionals like doctors, lawyers and chartered accountants for business objectives under its scope.

 To ensure more businesses benefit, it was decided to increase the upper ceiling of loans outstanding as of February for being eligible under the scheme to Rs. 50 crore from Rs 25 crore. The maximum amount of funding under the GECL scheme was, proportionately increased to Rs. 10 crores from Rs 5 crore.

Earlier the government had announced Rs 20.97 lakh crore-economic package given the coronavirus pandemic and was made available to accommodate companies with an annual turnover of Rs 250 crore as against the earlier threshold of Rs 100 crore. As on October 5, the Banks and Non-Banking Financial Companies (NBFCs) have approved loans worth about Rs 1,.87 lakh crore while disbursement stood at Rs 1.36 lakh crore.