Banks Free to Restrict Advances on MSME Loans

Banks and other lenders have now been given the flexibility to restrict advances on MSME loans and do their own diligence below the stipulated limit despite the government pledging full guarantee for up to 20% additional, collateral-free working capital loans under the Rs 3 lakh crore ECLLGS scheme, earlier this month.

No new MSME borrower shall be eligible for the guaranteed loan under this scheme. This also creates a scope for some lenders to exploit the situation well, in case there is no intervention by the government.MSME Loans

While the bank/NBFCs were expected to be liberal in sanctioning the loans under Rs 20 lakh crore package, they are also expected to weigh every credit proposal by using the necessary banking judgments required before granting approval to such loans.

The government has earmarked a collection of total Rs 41,600 crore over the current as well as next three financial years to execute this scheme. The scheme aims at supporting the borrowers who are not at default. The budding entrepreneurs can also take advantage of the Mudra scheme that focuses on supporting entrepreneurs from the vulnerable section of the society.

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