Union Cabinet approves Rs 3 lakh crore credit guarantee scheme for MSME sector
The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday approved the “Emergency Credit Line Guarantee Scheme” for Ministry of Micro, Small and Medium Enterprises (MSMEs) sector as announced by Finance Minister Nirmala Sitharaman as part of the government’s ‘Atmanirbhar Bharat Abhiyaan’.
The scheme will enable additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested MUDRA borrowers, the government said.
Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs 4 lakh crore to eligible MSMEs and interested MUDRA. borrowers, in the form of a Guaranteed Emergency Credit Line (GECL) facility,” the government said in a press release.
For this purpose, corpus of Rs 41,600 crore shall be provided by Government of India spread over the current and the next three financial years, it said.
The Cabinet also approved that the scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to October 31, 2020 or till an amount of Rs 3,00,000 crore is sanctioned under the GECL, whichever is earlier.
The Emergency Credit Line Guarantee Scheme (ECLGS) has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector, the government said.
The scheme aims at mitigating the economic distress being faced by MSMEs by providing them additional funding of up to Rs 3 lakh crore in the form of a fully guaranteed emergency credit line, it added.
The main objective of the scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs) to increase access to, and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by providing them 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers, it further said.
The government said the scheme has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.
“In view of the critical role of the MSME sector in the economy and in providing employment, the proposed Scheme is expected to provide much needed relief to the sector by incentivizing MLIs to provide additional credit of up to Rs.3 lakh crore to the sector at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses,” it said.
“By supporting MSMEs to continue functioning during the current unprecedented situation, the scheme is also expected to have a positive impact on the economy and support its revival,” it added.