Now doctors, CAs, lawyers also can get loan under MSME emergency credit scheme as govt relaxes criteria

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Updated: Aug 02, 2020 11:32 AM

Credit and Finance for MSMEs: As of July 29, loans of as much as Rs 1,36,155 crore were sanctioned to 40 lakh units, of which Rs 87,227 crore was already disbursed—a sign of the appeal of the scheme that was rolled out only on June 1.

The government has earmarked a corpus of Rs 41,600 crore over the current and the next three financial years to implement the ECLGS.

Credit and Finance for MSMEs: The government has decided to relax the eligibility criteria for tapping the Rs 3-lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS) to cover professionals and enable a much wider pool of businesses to benefit from it, finance minister Nirmala Sitharaman said on Saturday.

Although there is no review of the scheme’s overall credit limit (Rs 3 lakh crore) yet, the additional beneficiaries are estimated to be sanctioned guaranteed loans of about Rs 1 lakh crore.

The annual turnover limit of companies to be eligible to tap the scheme will be raised to Rs 250 crore from Rs 100 crore now, in sync with the revised definition of the MSMEs. Financial services secretary Debashish Panda said individuals such as doctors, chartered accountants, lawyers, etc, who wish to take loans for professional purposes, will also be covered under the scheme.

Eligible businesses with up to Rs 50 crore outstanding as of February 29 will be eligible, instead of the extant cap of Rs 25 crore. The Centre has pledged full guarantee for up to 20% extra, collateral-free working capital loans under the ECLGS. This means each eligible borrower can obtain up to Rs 10 crore guaranteed loan.

“The relaxation was made, keeping in view the success of the scheme and its potential to help businesses,” Sitharaman said.

As of July 29, loans of as much as Rs 1,36,155 crore were sanctioned to 40 lakh units, of which Rs 87,227 crore was already disbursed—a sign of the appeal of the scheme that was rolled out only on June 1.

Asked if the GST Council will be allowed to borrow funds for distribution to states to fight the pandemic, Sitharaman said the opinion of the attorney general has been sought for this purpose. The AG’s opinion will be placed before the next meeting of the council, the date for which is yet to be set.

Financial services secretary Panda said as many as 1.12 crore farmers have been extended kisan credit cards (KCC), with a cumulative sanctioned limit of Rs 90,000 crore. Farmers who take loans through KCC card are also eligible for cover under the crop insurance scheme. No collateral is required for loans up to Rs 1.6 lakh from SBI. This came as a boost to kharif sowing, which typically starts from June, with the arrival of seasonal monsoon showers.

To boost liquidity for non-banking financial companies (NBFCs), the secretary said total purchases of NBFC assets and debt under the Rs 45,000-crore partial credit guarantee scheme have touched Rs 18,000 crore, and purchases worth another Rs 5,800 are in the offing. In May, the Cabinet approved the proposed partial credit guarantee scheme (PCGS) 2.0 (worth Rs 45,000 crore) to improve liquidity for low-rated shadow lenders, and eased certain criteria for the pooled purchase of NBFC assets by state-run banks under the existing PCGS 1.0.

The ECLGS, the drive to distribute KCC and liquidity for NBFCs were an important part of the government’s `21-lakh-crore relief package (upt o May) to help individuals and businesses tide over the damaging impact of the Covid-19 outbreak.

The government has earmarked a corpus of Rs 41,600 crore over the current and the next three financial years to implement the ECLGS. Loans under the scheme will have a 4-year tenor with moratorium of 12 months on the repayment of the principal amount. The interest rate will be capped at 9.25% a year for banks and financial institutions and 14% for non-financial banking companies. The scheme can be tapped until October 31 or until the Rs 3-lakh-crore limit is exhausted, whichever is earlier. As many as 45 lakh units can resume business activity and safeguard jobs, Sitharaman had said in May, while announcing the scheme.

Similarly, as many as 2.5 crore PM-Kisan beneficiaries, who didn’t have the KCC, were to be covered under the official credit net through the special drive. The Centre hopes to disburse loans of Rs 2 lakh crore to help these farmers. Farmers in the animal husbandry and fishery sectors are also covered under the KCC, she added.

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