PSBs Disburse Massive Rs 21,029-Cr Loan to MSMEs under the Credit Line Guarantee Scheme

The Ministry of Finance said on Friday that public sector banks disbursed Rs 21,028.55 crore under the Rs 3-lakh Crore Emergency Credit Line Guarantee Scheme (ECLGS) for the stress-induced coronavirus-reeling MSME sector. Loans worth Rs 40,416 crore have been sanctioned by public sector lenders under the 100% Emergency Credit Line Guarantee Scheme for micro, small and medium-sized enterprises starting June 1.

Credit Line Guarantee SchemeThe scheme is the largest fiscal portion of the Rs 20-lakh crore ‘Self-Reliant India Project’ package that was announced last month by Finance Minister Nirmala Sitharaman on the Emergency Credit Line Guarantee Scheme. “As of 18 June 2020, PSBs have sanctioned loans worth Rs 40,416 crore under the 100% Emergency Credit Line Guarantee Scheme, out of which Rs 21,028.55 crore has already been disbursed,” Sitharaman said in a tweet.

Gujarat business units had the highest cumulative sanction of Rs 4,156 crore from banks, while at the end of June 18 disbursement was Rs 1,657 crore. It is followed by Maharashtra, with a Rs 4,009.46 crore sanction, with Rs 1,735 crore disbursement. As indicated in the table given in the tweet, market leader State Bank of India ( SBI) sanctioned Rs 15,950.49 crore and disbursed Rs 10,667.29 crore as of June 18.

Bank of Baroda is followed by a sanction of Rs 4,986.61 crore, but disbursement was Rs 1,527.32 crore at one-third. The second-largest lender Punjab National Bank, with the cumulative sanction of Rs 4,270.74 crore, was rather a laggard according to the numbers. Its disbursement on June 18 was almost one-third at Rs 1,366.57 crore.

Canara Bank has a higher disbursement rate than Rs 3,982.60 crore, as Rs 1,954.44 crore has been disbursed by the Bengaluru-based lender. On May 21, the Cabinet approved additional funding for the MSME sector for up to Rs 3 lakh crore at a concessional rate of 9.25 percent via the Emergency Credit Line Guarantee Scheme.

Under the scheme, National Credit Guarantee Trustee Company (NCGTC) will provide 100 percent guarantee coverage to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers for additional funding of up to Rs 3 lakh crore, in the form of a guaranteed emergency credit line (GECL) facility.

To this end, the Government provided a corpus of Rs 41,600 crore, spread over the current and next three financial years. The scheme will apply to all loans granted under the GECL facility during the period from the scheme’s announcement date to October 31 or until an amount of Rs 3 lakh crore is sanctioned under GECL, whichever is earlier.

The key objective of the scheme is to provide an incentive for member lending institutions to increase access and allow MSME borrowers to have access to additional funding facility, given the economic hardship caused by the COVID-19 crisis, by providing them with a 100 % guarantee for any losses they may incur as a result of non-repayment by borrowers of the GECL funding.

All MSME borrower accounts with an outstanding credit of up to Rs 25 crore as of February 29 which were less than or equivalent to 60 days past due as of that date, i.e. daily, SMA-0 and SMA-1 accounts, and with an annual turnover of up to Rs 100 crore, will be eligible for GECL funding under the scheme.

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