Finance Minister Urges Private Banks to Effectively Rollout ECLGS for MSMEs
To reduce miseries of small businesses, the Finance Minister of India, Nirmala Sitharaman recently held a meeting with various private sector banks. In this meeting, the Finance Minister urged them to make sure effective rollout of INR 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSME segment, which is severely hit by Coronavirus. Non-banking Financial Companies (NBFCs) also attended the same meeting that was conducted through a video conference, Financial Express reported.
The Finance Minister chaired a meeting through video conference with major private banks and NBFCs to ensure effective roll out of ECLGS and uninterrupted/ smooth liquidity to Indian MSMEs in this difficult time. Debasish Panda, Secretary, Department of Financial Services, was also present in the meeting, the Ministry of Finance said in a tweet.
Under the 100 per cent ECLGS scheme, the public sector banks have credits worth INR 29,490.81 crore. Out of which, INR 14,690 crore worth credit is disbursed by the banks to date.
The scheme is considered to be the most crucial part of the INR 20 lakh crore package that was proclaimed by the Finance Minister last month, according to the media report.
In May this year, the government had sanctioned additional funding of around INR 3 lakh crore at a concessional rate of 9.25 per cent through ECLGS for the MSME sector. In this scheme, National Credit Guarantee Trustee Company rendered 100 per cent guarantee coverage for additional funding of up to INR 3 lakh crore, which will be offered to eligible MSMEs and interested MUDRA borrowers in the form of a guaranteed emergency credit line (GECL) facility.
What's the Objective of Scheme
The primary aim of the scheme is to offer an incentive to lending companies to enhance access and availability of additional funding facility to MSME borrowers in the pandemic. The scheme facilitates 100 per cent guarantee for losses faced by MSME owing to non-repayment of GECL funds.
For this reason, the government provides a collection of INR 41,600 crore to the MSME segment in the form of loans in the present as well as coming three fiscals. This scheme is applicable to all loans permitted under GECL facility from the date of scheme’s announcement to October 31 or till the amount of INR 3 lakh crore is disbursed under GECL, whichever is earlier.
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