A new round of economic stimulus was announced on June 28, 2021, by Honorable Finance Minister Ms. Nirmala Sitharaman
Package worth Rs. 6.29 lakh crores were announced for relief of struggling MSMEs affected by the catastrophic second wave of Covid-19 pandemic.
As you may be aware, ECLGS (Emergency Credit Line Guarantee Scheme) was extended till September 30, 2021, under which MSMEs were entitled to an additional 20% loan backed by sovereign guarantee.
Now the scheme announced on June 28, 2021, is aimed at sectors severely affected by the pandemic.
The FM has increased the cap of admissible guarantees from 3 lakh crore to 4.5 lakh crore.
The scheme will have a focus on new lending and not on repayment of old loans.
Government shall give guarantee to schedule commercial banks for loans to existing/new NBFC-MFIs for loans up to 1.25 lakhs to 25 lakhs for small borrowers.
· A new scheme has been introduced to give a collateral-free loan of Rs. 1.25 lakh to 25 lakhs for small borrowers at lower interest rates.
· All borrowers including defaulters up to 89 days will be covered under this scheme.
·The scheme shall be in force till March 2022 or till the guarantee amount of Rs. 7500 crores are issued, whichever is earlier.
·Further, government extends through National Credit Guarantee Trust Company 75% of default amount up to 3 years without guarantee fee charged.
·The last date for disbursement under this scheme extended till December 31, 2021.
·100% credit guarantee cover is given to loans for hospitals, nursing homes, clinics, medical colleges, setting up on-site oxygen generation plants with an interest cap of 7.5%, which can be lesser offered by banks for loans amounting up to Rs. 2 crores.
· Steps to give a boost to the ailing tourism sector include credit guarantee loans to tourism stakeholders and 5 lakh tourist visas free this year.
· Personal loans to be provided to the people in the tourism sector to revive their business, which had come to a standstill because of the pandemic. Up to 10,700 regional tourist guides recognized by the Ministry of Tourism and state-level tourist guides will be covered under this scheme.
However, in our opinion, the MSMEs already in the red should exercise caution while borrowing as it will increase the liability on their part.
The borrowers can go for funding only in case the funds can generate new business or if it is a new venture.
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