On May 20, the Union Cabinet headed by PM Modi approved additional funding of Rs. 3 lakh crore to the Medium and Micro Enterprises (MSMEs). Loans at the concessional rate of 9.25 percent will be provided to MSMEs by banks through Emergency Credit Line Guarantee Scheme (ECLGS) which is the second key component of Covid-19 Relief Package by Government. NBFCs will provide loans at a capped interest rate of 14 per cent.
National Credit Guarantee Trustee Company (NCGTC) will provide 100 percent guarantee coverage on this additional funding provided through Guaranteed Emergency Credit Line (GECL) facility to MSMEs. Those MSMEs will be eligible for getting the benefit through ECLGS who had up to Rs.25 crore in their borrower account on Feb, 29 which were less than or equal to 60 past due as on that day.
MSMEs borrowing loans through Mudra Scheme will also be benefitted and their borrowing amount will also have a guarantee coverage by the government. A corpus of Rs.41,600 crore will be provided for the next 3 years for implementation of this government scheme to the loan providers. It will encourage Member Lending Institutions like NBFCs and banks to sanction loans for MSMEs with ease.
The scheme will be applicable to all loans issued under GECL facility till October 31. The scheme will help stressed MSMEs to get relief from the economic fallout of Covid-19 on them and may have a positive effect on the economy.