Government Extends Credit Line for MSMEs by a Month

The government had announced the Emergency Credit Line Guarantee Scheme (ECLGS) as part of the special economic package for the MSMEs. A relief package of Rs.20 lakh crore was declared by the Prime Minister to help the MSMEs and industries overcome the COVID-19 situation. Under this scheme, the government announced a relief of Rs.3 lakh crore loans to provide additional funding to the MSMEs.

Out of the Rs.3 lakh crore announced, there is already a sanction of more than Rs.2 lakh crore loans under ECLGS. On Monday, the Union Government extended the ECLGS by one month till 30 November.

2020 or till such time that the whole amount of Rs.3 lakh crore is sanctioned. Earlier, the last date to avail this scheme was 31 October 2020. The deadline of this scheme is extended now till 30 November 2020 or till the sanction of the whole amount of Rs.3 lakh crore, whichever occurs earlier. 

The announcement of the extension of date for availing this scheme is because of the expected increase in demand during the current festive season. The extension is also due to the functioning of business of various sectors in the economy after the lockdown. This extension of ECLGS gives a further opportunity to obtain credit under this scheme for such borrowers who have not yet availed it so far. 

Also Read: MSME ‘Champions’ Portal Integrates the Power of Artificial Intelligence

The ECLGS was announced as part of the Aatmanirbhar Bharat Package for providing collateral-free and guaranteed extra credit to MSMEs, individual loans for business purposes, MUDRA borrowers and business enterprises. Under this scheme, additional working capital finance of 20% of the outsourcing credit as on 29.02.2020 is given in the form of term loans. 

The eligibility is that the borrowers must have credit outstanding of not more than Rs.50 crore as on 29.02.2020 and an annual turnover of up to Rs.250 crore. Under this scheme, interest rates are capped at 9.25% for banks and financial institutions. Interest rates are capped at 14% for non-banking financial companies (NBFCs). The tenure of the loans provided under this scheme is four years. The moratorium period is one year on principal repayment.

All businesses or MSMEs who fit the eligibility criteria prescribed by this scheme can avail for loans under it. The MSMEs can apply for loans through banks, Department of Financial Services (DFS) and National Credit Guarantee Trustee Company Ltd (NCGTC).

There is already a sanction of Rs.2.03 lakh crore under ECLGS as per the data uploaded by member lending institutions on the ECLGS portal. Around 60.67 lakh borrowers have availed this scheme so far, while there is a disbursement of Rs.1.48 crore till now.

The extension of the date by one month will help the MSMEs to obtain additional funding under this scheme. The MSMEs have been hit badly due to COVID-19 crisis. MSMEs can take benefit under this scheme and resume their business activities while also safeguarding the employment of the people.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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