Rs 3 Lakh Crore MSME Loan: Know Interest Rates, Eligibility & FAQs

The government has finally notified the ins and outs of Rs 3 Lakh Crore MSME Loan Scheme under the Atma Nirbhar Bharat Abhiyan. The MSME Loans Scheme is introduced as a 100% Credit Guaranteed Loan Scheme – Emergency Credit Line Guarantee Scheme (ECLGS) as a part of Rs. 20 lakh crore COVID 19 financial package. The scheme was announced by Finance Minister Nirmala Sitharaman on May 13, 2020.

The Union Cabinet has announced a concessional lending rate of 9.25% from banks and 14% from NBFCs for ECLGS so that Micro, Small and Medium Enterprises (MSMEs) sector to confidently tide through the financial disruptions caused by COVID-19 pandemic. The government has decided to set up a fund of Rs 41,600 crore under National Credit Guarantee Trustee Company Limited (NCGTC) for facilitating loans guarantee under the scheme.

The MSMEs having up to Rs 25 crores of total borrowing can apply for this credit scheme. All distressed and struggling MSMEs units can apply credit guaranteed loans for 20 percent of their current loan outstanding from banks, NBFCs and financial institutions (FI).

The loans will come with one-year moratorium relief. Besides the stressed units, the standard accounts, SMA-0 (overdue up to 30 days) and SMA-1 (overdues of up to 60 days) are also eligible for these loans.

Highlights of GECL Scheme:

Factor	Details
Name of the facility	Guaranteed Emergency Credit Line (GECL)
Facility Type	Fund Based- Working Capital Term Loan
Validity of Scheme	Up to 31.10.2020 or October 30, 2020 Or, As per consumption of allotted fund/ reaching threshold stipulated by the authorities for GECL (Whichever is earlier will be applicable)
Purpose	100 % Guaranteed Credit Scheme Launched amidst COVID 19 especially for MSMEs. The target is to help business enterprises meet their working capital and term loan shortages without difficulties and ease the augmentation of their business operation during & after COVID-19 crisis.
Eligibility Criteria	All borrower accounts of BEs and MSMEs with combined outstanding of up to Rs. 25 crore in loans as on 29.2.2020 annual turnover of up to Rs.100 crore in the FY 2019-20 In case accounts are not audited yet, the lenders may rely upon the borrower’s declaration of turnover.
	Loans provided as Proprietorship, Partnership, registered company, trusts and Limited Liability Partnerships (LLPs) shall be eligible under the Scheme; Individual loans will not be counted.
	Also, loans covered under Pradhan Mantri Mudra Yojana (PMMMY) on or before 29.02.2020 will be considered. The date of allotment of PMMMY will be as per the report on the MUDRA portal.
	For Total Outstanding Amount will be as per balance sheet. Off-balance sheet and non-fund-based exposures will not be considered
	Only existing customers on the books of member lending institutions as on 29.02.2020
	Only standard accounts are eligible. Accounts should be less than 60 days of outstanding as on 29.02.2020. Accounts marked as NPA or SMA-2, as on 29.02.2020 shall not be eligible
	For loans co-applicant loans, only primary co-applicant are eligible
	Borrower must be GST registered, wherever applicable
	To be eligible, existing loans may or may not be covered under ECLGS of NCGTC.
Loan Amount	Up to 20% of total credit based outstanding as on 29.02.2020, subject to maximum of Rs. 5 crore.
Disbursement	Maximum in four tranches
Tenor	Maximum 4 years from the date of disbursement
Moratorium	1 year or 12 months for principal only. Interest should be paid at monthly intervals
Repayment Terms	Principal to be repaid in 36 EMIs after moratorium.
	Interest should be paid as applied.
	Prepayment is allowed and there is no charge for foreclosure or part payment.
Margin	Nil
Interest Rate	Banks: Max 9.25% NBFCs: Max 14 % Eg. SBI is offering effective 7.80% to 9.25% (basis EBLR (presently 7.05%) + 75 bps)
Collateral	No additional collateral required
Processing fee/ Pre-payment penalty/ Penal interest	Nil
Guarantee Fee payable to credit guarantee trust	Nil
Extent of guarantee Coverage	100% Guarantee coverage by National Credit Guarantee Trustee Company Ltd (NCGTC) on outstanding amount.

Also Read :  COVID 19 Personal Loan in India

Here are some Frequently Asked Questions (FAQ) for Govt’s 100% Guaranteed Emergency Credit Line of Rs 3 lakh crore for MSMEs.

✅ What is Guaranteed Emergency Credit Line (GECL) Scheme for MSMEs?

As the name suggests, Guaranteed Emergency Credit Line or GECL is the central government’s 100 percent credit guarantee scheme for MSMEs. Under this scheme, National Credit Guarantee Trustee Company (NCGTC) offers 100% guarantee to Member Lending Institutions (MLIs) such as banks, NBFCs & Financial Institutions against working capital term loan facility or additional term loan facility for Small and Medium Business Enterprises. The eligible units could be running as registered companies, proprietorships, partnerships, trusts and limited liability partnerships (LLPs), or the borrowers under PMMY.

✅ What is the objective of guaranteed emergency MSME loan?

The MSME Atmanirbhar Loan Scheme is announced to support businesses amidst unprecedented financial distress caused due to COVID-19. The loan will provide credit cushion to businesses in meeting their operational liabilities and restart their operations after the lockdown.

✅ What are the eligibility criteria for MSMEs to avail loan under Emergency Credit Line guaranteed Scheme?

The eligibility criteria for Emergency Credit Line guaranteed Scheme (ECLGS) as announced by FM Nirmala Sitharaman under Atma Nirbhar Bharat Package are as shared below:

• All Micro, Small & Medium enterprises (MSMEs) with combined borrower account across all member lending institutions (MLIs) worth up to Rs. 25 crore as on February 29, 2020, subject to annual turnover up to Rs. 100 crore in financial year 2019-20 are eligible to apply under the scheme. However, if the accounts are yet to be audited or finalized for the financial year, the lenders can consider borrower’s declaration about turnover.
• The benefit of drawing 100% guaranteed loan under the Scheme are extended only existing customers on the books of the participating lending institutions.
• The accounts of borrower should be classified as regular, SMA-0 or SMA-1 as on February 29, 2020.
• Any accounts classified as NPA or SMA-2 prior March 1, 2020 will not be eligible for the Scheme.
• Also, the MSME must be registered for GST, wherever required.
• Individual loans will not be considered for this credit scheme.

✅ What is the applicable credit limit for MSMEs?

MSMEs can avail up to 20% of their outstanding credit, which is subject to the working capital limit mentioned as above.

✅ Why Covid MSME Loan is termed as Emergency Credit Line Guarantee Scheme?

This is called Emergency Credit Line Guarantee Scheme as the NCGTC is providing 100 percent guarantee coverage for MSMEs seeking loan assistance during the COVID times.

✅ Who are member lending institutions for MSME Scheme?

All scheduled commercial banks and NBFCs that are operational for at least 2 years as on February 29, 2020 are the member lending institution under the MSME Scheme. Financial institution under  45-I(c)(i) of RBI Act are part of the scheme.

✅ What are the beginning and ending dates of the scheme?

The scheme will be applicable to all loans sanctioned under the GECL from the date of announcement of the scheme to 31.10.2020, or till an amount of Rs. 3 lakh crores is sanctioned under the GECL, whichever is earlier.

✅ What is the guarantee cover for MSME Loan?

100% guarantee coverage will be provided to the borrowers under the scheme by NCGTC (National Credit Guarantee Trustee Company Limited).

✅ What is the total corpus of Guarantee offered under the scheme?

The Union Government will build a credit guarantee fund of Rs. 41,600 croreswith

National Credit Guarantee Trustee Company Limited (NCGTC) to offer loan guarantee to member lending institutions including NBFCs & FIs.

✅ What is new definition of MSME?

While announcing the first tranche of the Rs. 20 lakh crores Covid 19 financial package, Finance Minister Nirmala Sitharaman also announced a change in the definition of MSMEs.

As per the revised definition:

• A firm with an investment of up to Rs. 1 crore & turnover under Rs. 5 crores will be classified as a ‘micro’ unit.
• A company with an investment of up to Rs. 10 crores & turnover up to Rs. 50 crores will be classified as a ‘small’
• A firm with an investment of up to Rs. 20 crores & turnover under Rs. 100 crores will be classified as a ‘medium’ unit.

On May 19, Nitin Gadkari (Union Minister for MSMEs) said that the government is considering to revise the definition for medium units by enhancing the investment & turnover limits to up to Rs. 50 crores and Rs. 200 crores, respectively.

The previous criterion for classifying the “medium” category enterprises was investment up to Rs. 10 crores and turnover of up to Rs. 5 crores.

Given the critical contribution of the MSME sector in the Indian economy and in employment generation, the government has proposed the said scheme to enable MSMEs to meet their operational liabilities and restart businesses after the lockdown.

✅ Who is eligible to avail the benefit of MSME guaranteed COVID loans?

All MSMEs that have an annual turnover of up to Rs. 100 crores and have outstanding credit of up to Rs. 25 crores as on 29.02.2020 will be eligible under the scheme. The Scheme is offered only to existing customers of member lending institutions. The accounts should be classified as regular, SMA-0 or SMA-1 and not as NPA or SMA-2 as on 29.02.2020.

✅ Are borrowers under PMMY also eligible for MSME Loan?

Yes, all interested borrowers under PMMY as on 29.02.2020 are eligible. The list can be checked on the MUDRA portal.

✅ Will MSME GECL be treated as a separate account, or a top up to the existing loan?

This loan will be a separate account.

✅ Will eligible MSMEs automatically get MSME loan under Atmanirbhar Credit scheme?

The borrowers would be required to share their consent for the loan. It would not be automatically sanctioned. A pre-approved loan offer will be sent to the eligible borrowers from the member lending institutions. The interested borrowers can accept the offer and complete the required documentation and procedure.

✅ Will get multiple offers if i have business loans with many lenders?

No. The GECL will be offered as per the approved limit. You may get use it from one lender only or proportionately from multiple lenders.

✅ Can I borrow more than 20 percent of the outstanding credit?

Under MSME scheme, if a borrower wants to avail of more than 20% of loan outstanding, a No Objection Certificate (NOC) is required to be presented from all existing lenders.

✅ Is it mandatory to have my business loan covered under guarantee schemes like CGFMU or CGTMSE?

No.

✅ What is the applicable interest rate for GECL?

MSMEs will get guaranteed emergency credit under this scheme at RBI prescribed external benchmark linked rates +1 percent. The interest rates are capped maximum at 9.25% from banks and financial institutions. Similarly, rates of interest for collateral-free loans have been capped at the maximum of 14% for non-banking financial companies (NBFCs). Also the borrowers can cub benefits of other interest subvention schemes as per the eligibility. In general, banks in India, as on date, charge between 11 to 16.25% interest while NBFCs charges between 10 to 30% for business loans.

✅ What is the repayment tenure for GECL MSME scheme?

The loan must be repaid within 4 years after the completion of 1 year’s moratorium. There is no pre-payment penalty in case of foreclosure or early repayment.

✅ Is there any moratorium for loans under the schemes?

Yes. The loans will have a moratorium period of one year on the principal amoun for GECL funding. Interest will accrue during the moratorium period and the repayment shall be made within three years of serving the moratorium.

✅ Is any guarantee fee charged by NCGTC?

No, NCGTC will not charge any fee for providing credit guarantee.

✅ Is any processing fee needs to be paid for sanction of loans under GECL?

Since the offer is only for existing customers, no additional processing fee should be charged by lenders.

✅ Is collateral required for the GECL facility?

No. Collateral is not required as the loan is provided against guarantee by NCGTC.

✅ Who has set the operational guidelines for Emergency Credit Line Guaranteed Scheme (ECLGS)?

NCGTC has issued the detailed operational guidelines. A Management Committee is set for making any changes to ECLGS’s structure or operational guidelines.

✅ How does a GST registered business qualify as an MSME for credit guaranteed loan?

Any business such as shot or unit registered under GST qualifies for credit guaranteed loan if it meets the standard eligibility requirements of turnover and outstanding loan. No registration is required for availing of MSME status.

✅ Why did I receive pre-approved credit guaranteed loan offer for less than 20 percent?

The MSME guaranteed loans can be offered for a maximum of 20 percent outstanding loan and thus the limit may vary based on credit policy as well as your profile

✅ What is the procedure for claim settlement under the scheme?

The notification will be soon issued for claim settlement.

✅ Are new MSME borrowers also eligible for CGL scheme?

This scheme is specifically issued for existing units facing the fall out due to inactivity caused by Corona Virus Lockdown. The status is checked as on 29th Feb 2020. Any New borrowers who received loan after the feb 29 should be eligible for other schemes such as CGTMSE and NCGTC.

✅ Can I apply for CGL for co-applicant loans between two entities?

Only primary co-applicant can apply for the additional emergency funding under this scheme.

✅ Are off-balance sheet loans also eligible for credit guarantee?

No, only only on balance sheet loans and outstanding as on 29.2.2020 are covered under the MSME credit guarantee scheme.

✅ How do I get answers to any further queries on Credit guarantee MSME loans?

You can email your queries and suggestions at: ceo@ncgtc.in