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Govt extends emergency credit line guarantee scheme till November 30

Earlier deadline was Oct 31, Under the scheme, 100% guarantee is provided by National Credit Guarantee Trustee Co for additional funding of Rs 3 trillion to borrowers

Bank loans | Finance Ministry | Centre

Somesh Jha  |  New Delhi 

Photo: Bloomberg
Photo: Bloomberg

The National Democratic Alliance (NDA) government on Monday announced extending the time window for businesses to seek sovereign-guaranteed loans under the Emergency Credit Line Guarantee Scheme (ECLGS) by one month till November 30.

The said in a statement that it has extended the scheme till the end of this month or “or till such time that an amount of Rs 3 trillion is sanctioned under the Scheme, whichever is earlier, in view of the opening up of various sectors in the economy and the expected increase in demand during the ongoing festive season.” The scheme, in place since May 23, had a deadline of October 31.

Under the scheme, 100 per cent guarantee coverage is being provided by the National Credit Guarantee Trustee Company for additional funding to the tune of Rs 3 trillion to borrowers. Banks provide fully guaranteed and collateral free additional credit to micro, small and medium enterprises, businesses, individual loans for business purposes and Mudra borrowers, to the extent of 20 per cent of their credit outstanding as of 29.2.2020.

Though the sanctioning target was set at Rs 3 trillion, till date, banks have sanctioned loans worth around Rs 2 trillion under the scheme, out of which Rs. 1.48 trillion has been disbursed for use by businesses.

Interest rates for loans under the scheme are capped at 9.25 per cent for banks and financial institutions, and 14 per cent for non-banking financial companies. The tenor of loans provided under the scheme is four years, including a moratorium of one year on principle repayment.

Localised lockdowns, coupled with lack of demand in the economy were seen as reasons behind lower-than-expected sanctioning of loans by the finance ministry, according to a senior government official.

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First Published: Mon, November 02 2020. 16:29 IST