Guaranteed loans will be provided to stressed assets, impacted by the Covid-19 pandemic, from the existing credit line of Rs three trillion earmarked for the previous scheme meant for small businesses.
The operational guidelines for the ‘guaranteed emergency credit line’ scheme issued on Thursday stated that the scheme would be applicable to all 26 sectors, identified by the K. V. Kamath committee on resolution framework and health sector, with past dues from Rs 50-Rs 500 crore as of 29 February, 2020.
The scheme will be in force till March 31 or till the time Rs 3 trillion is sanctioned under the scheme “taking into account both emergency credit line guarantee scheme 1.0 and 2.0, whichever is earlier.”
“Accordingly, you should avail of the guarantee cover at the earliest or else you may lose the same if the amount of guarantees issued under the scheme crosses the mark of Rs.3 lakh crore,” the frequently asked questions issued by the National Credit Guarantee Trustee Company, which is providing credit guarantee for the scheme, on Thursday said.
This means that the credit line for stressed assets would be out of the remaining Rs 1 trillion, which can also be utilised by micro, small and medium enterprises, business enterprises, and individual loans for business purposes with credit outstanding of up to Rs 50 crore from financial institutions.
Till November 12, banks have already sanctioned Rs 2.05 trillion to 6.1 million borrowers under ECLGS 1.0.
“Entire disbursement out of fund-based facility and utilization of at least first tranche under non-fund based facility should happen on or before 30 June 2021.
Utilisation of further tranches under non-fund based facility can happen subsequently during the currency of the guarantee cover,” according to the guidelines.
Borrowers who have availed assistance under the ECLGS 1.0 will not be eligible for coverage under the new scheme.
Under the scheme, borrowers are eligible for total assistance upto 20 per cent of their credit outstanding across all lending institutions as of February 29, 2020. “This assistance could be in the form of fund based facility, non-fund based facility or a mix of the two. Credit decision of how much would be fund based and/or how much would be non-fund based would rest with the micro lending institutions,” the guidelines said.
The tenor of fund based facility provided under ECLGS 2.0 will be five years from the date of first disbursement under the fund-based or non-fund based facility. “No tenor has been prescribed for non-fund based facility, but the guarantee cover on the non-fund based facility shall expire on completion of five years from the date of first disbursement under fund based or non-fund based facility,” the guidelines stated.
The principal amount will have to be repaid in 36 instalments after the moratorium period is over in case of loans covered under ECLGS 1.0 and in 48 instalments after the moratorium period in case of loans covered under ECLGS 2.0. “There shall be no moratorium for non-fund based facility,” the scheme said.
Loans under the scheme will be linked to external benchmark rates for MSMEs and marginal cost-based lending rate for non-MSMEs. “Overall lending rate is capped at 1 per cent above the external benchmark lending rate (for MSMEs) and marginal cost based lending rate (for non-MSMEs) or 9.25 per cent p.a. whichever is lower. Loans which are allowed not to be benchmarked to external rates shall be capped at maximum of 9.25 per cent,” according to the guidelines. The interest rate for non-banking financial companies and housing financial companies will be capped at 14 per cent.