Credit and Finance for MSMEs: The Union Finance Minister, Nirmala Sitharaman has called public sector banks’ heads and top private sector lenders for a review meeting on the progress of the centre’s flagship credit scheme, emergency credit line guarantee scheme (ECLGS) to help businesses affected by the pandemic, reported PTI on Sunday.
The meeting will also review the status and progress of Loan Guarantee Scheme for COVID-Affected Sectors (LGSCAS) on Wednesday (Feb 22), it said citing sources.
Discussions on the extension of ECLGS and LGSCAS beyond March 31 and challenges pertaining to these government schemes will be addressed.
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The meeting is likely to be chaired by Financial Services Secretary Vivek Joshi and will also see participation from private sector lenders such as HDFC Bank
The ECLGS scheme was laid out under the Atmanirbhar Bharat Package in May 2020 with the aim to strengthen businesses and MSMEs to meet their operational liabilities, post COVID-19 crisis. The scheme provides banks 100 per cent guarantee against any losses suffered by them due to non-repayment of the funding by borrowers.
Initially, the scheme announced an overall ceiling of Rs 3 lakh crore which was subsequently enhanced to Rs 4.5 lakh crore. In the last union budget (2022-23), the extension validity of the scheme was announced up to March 2023. It has also announced an increase in the limit of guaranteed cover of ECLGS by Rs 50,000 crore to a total cover of Rs 5 lakh crore with an additional amount earmarked for hospitality and related sectors.
In the latest budget announcement for 2023-24, FM Sitharaman said, “Last year, I proposed revamping the credit guarantee scheme for MSMEs. I am happy to announce that the revamped scheme will take effect from 1st April 2023 through the infusion of Rs 9,000 crore in the corpus.”
Revamping the credit guarantee scheme under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), “will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit will be reduced by about 1 per cent,” said Sitharaman.
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For easy repayment terms on credit extended to the MSME sector, the government has capped the interest rate under ECLGS at 9.25 per cent for banks and financial institutions and 14 per cent for non-banking financial institutions (NBFCs), the report added. Furthermore, the scheme offers a one-year moratorium on payment of the principal component.
Meanwhile, the central government’s ECLGS has supported 14.6 lakh MSMEs which benefited from Rs 2.2 lakh crore in additional credit, as per a study. The additional credit flow has helped around 12 per cent of the outstanding MSME credit from slipping into NPAs.
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