As India continues to face economic distress, more affliction can be felt by MSME. To safeguard the MSME space, the Indian government has recently proclaimed INR 3 lakh crore Emergency Credit Line Guarantee Scheme for MSMEs. The scheme has been launched under the Atma Nirbhar Bharat Abhiyan and will help businesses in the MSME segment to mitigate the bad effects of COVID 19.
Under this scheme, MSMEs borrowers with upto INR 25 crores of total borrowing can avail an additional 20 per cent of the loan outstanding from banks, NBFCs and other financial institutions (FI), reported CNBC TV18.
The Indian government will be offering 100 per cent guarantee under this scheme to the banks and FIs offering up to INR 3 lakh crore in aggregate.
Explaining the Guaranteed Emergency Credit Line Scheme
GECL is a loan wherein National Credit Guarantee Trustee Company (NCGTC) offers 100 per cent guarantee to Member Lending Institutions (MLIs) and also, increased in the form of additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and FIs. NCGTC also offers additional term loan facility in case of NBFCs, to eligible MSMEs or business enterprises and interested Pradhan Mantri Mudra Yojana borrowers.
Credit under this scheme would be up to 20 percent of the borrower's total outstanding credit up to INR 25 crore, excluding off-balance sheet and non-fund based exposures, as on February 29, 2020, i.e. additional credit shall be up to INR 5 crore.
How will GECL Help MSMEs?
The scheme has been introduced observing the severe impacts of Coronavirus. The government seeks to provide relief to the MSME segment by stimulating MLI to offer additional loans upto INR 3 lakh at a low cost, in turn, allowing MSMEs to manage their operational liabilities and reinitiate their businesses.
The benefits that will be offered by the borrowers under this scheme include:
All loans accredited under GECL will be during May 23,2020 to October 31, 2020. Besides this, the government has pronounced several plans for elevating the business ecosystem and safeguard MSMEs for economic distress.
Other Moves Taken to Help MSMEs
Apart from the latest move, the government has proclaimed an array of programmes and schemes to reduce suffering of MSMEs in the country. Here are those plans: