Taking everyone at a surprise, especially for the MSME sector and small businesses, the Ministry of Finance has announced extension of the Emergency Credit Line Guarantee Scheme (ECLGS) by one month till 30 November, 2020, or till such time that an amount of Rs 3 lakh crore is sanctioned under the scheme.
However, the government was not much keen on extending Rs 3 lakh crore ECLGS for the MSME sector ahead of October. However, the sanctioned amount so far is about 65 per cent of the target. The scheme is meant to provide financial support to businesses, primarily Micro, Small and Medium Enterprises (MSMEs), impacted by the slowdown triggered by the coronavirus pandemic.
The extension is aimed at opening up diverse sectors in the economy and the expected increase in demand during the ongoing festive season. The extension will further provide an opportunity to the borrowers who are yet to avail this scheme, thereby can obtain credit under the scheme.
The ECLGS was announced as part of the AatmaNirbhar Bharat Package to provide fully guaranteed and collateral free additional credit to MSMEs, business enterprises, individual loans for business purposes and MUDRA borrowers, to the extent of 20 per cent of their credit outstanding as on February 29, 2020. Borrowers with credit outstanding up to Rs 50 crore as on February 29, 2020, and with an annual turnover of up to Rs 250 crore are eligible under the Scheme.
Interest rates under this Scheme are capped at 9.25 per cent for banks and financial institutions, and 14 per cent for NBFCs. Tenor of loans provided under the scheme is four years, including a moratorium of one year on principle repayment.
As per data uploaded by member lending institutions on the ECLGS portal, an amount of Rs 2.03 lakh crore has been sanctioned under the scheme to 60.67 lakh borrowers so far, while an amount of Rs 1.48 lakh crore has been disbursed.
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