In order to meet any liquidity mismatch, State Bank of India (SBI) has set up an emergency credit line for its borrowers to help them tide over the crisis triggered by the virus.
India’s largest lender, State Bank of India (SBI) has set up an emergency credit line for its borrowers in the wake of coronavirus as businesses are getting affected. SBI in its departmental circular, which addressed all its chief general managers, stated that the additional liquidity facility Covid-19 Emergency Credit Line (CECL) will provide funds up to 10 per cent of the existing fund based on the working capital limits (FBWC) or Rs 200 crore. It will be available till June 30, 2020. “With a view to provide some degree of relief to the borrowers whose operations are impacted by Covid-19, it is decided by the Bank to make available additional credit facilities to the eligible existing borrowers by way of ad-hoc facilities i.e COVID 19 EMERGENCY CREDIT LINE (CECL) to tide over the crisis situation. CECL will be in force upto 30.06.2020,” the circular read.
The loan will be offered for a period of 12 months or one year. All the standard accounts which have not been classified as special mention accounts (SMA) 1 and 2 as on March 16, 2020 are eligible to avail this loan.
It may be noted that SMA 1 accounts are those where principal or interest payment have been overdue for between 31 and 60 days, while SMA 2 accounts are ones with repayment delay of between 61 and 90 days. However, if an account sees repayments delayed by 90 days, it turns into an NPA (non-performing asset). Reserve Bank of India introduced the classification of Special Mention Accounts in 2014 so as to identify the accounts that have a potential to become an NPA or stressed asset.
According to a recent survey undertaken by FICCI, one in every two businesses have been impacted by the coronavirus outbreak. “Almost three-fourth of the businesses indicate big reductions in orders. Of these, almost 50% indicate a 20% and more decrease in the orders,” the report said. While, it further added that 60% businesses have indicated that their supply chains were affected.