Professionals, including doctors, chartered accountants and lawyers, who have taken a loan for their business needs will now be eligible for credit under the special credit guarantee scheme for MSMEs, the finance ministry said on Saturday.
The government has widened the scope of the Rs 3-lakh-crore MSME credit guarantee scheme by doubling the upper ceiling of loans outstanding to Rs 50 crore.
It has also tweaked the Emergency Credit Line Guarantee Scheme (ECLGS) based on demand from trade bodies and in line with the new MSME definition approved by the Union cabinet in June.
Briefing the media about the changes made, finance minister Nirmala Sitharaman said the scheme will now include individual loans given for business purposes within the ambit of the ECLGS, subject to the eligibility criteria of the scheme.
The finance minister said that the intended changes are likely to expand the ambit of ECLGS to make an additional amount of more than Rs 1 lakh crore eligible under the scheme.
Debasish Panda, secretary, department of financial services, said the changes to the scheme were taken after consultation with stakeholders and after taking into account the remaining headroom under the window. They, however, clarified that the loan guarantee will be within the Rs 3-lakh-crore cap.
According to the new terms, borrower accounts with loans outstanding of up to Rs 50 crore as on February 29 will be eligible for a loan guarantee on their additional borrowings of up to 20 per cent of their outstanding amount. The earlier limit was Rs 25 crore.
Similarly, the annual turnover eligibility has been increased to Rs 250 crore from Rs 100 crore.
These changes mean that the maximum loan amount a unit can avail themselves of will be Rs 10 crore against Rs 5 crore earlier.
Sources said over 80 percent of MSME entrepreneurs end up taking business loans in their individual capacity, and are not registered as MSMEs.
This had made most of them ineligible under the existing ECLGS facility, which only allowed loans to be given to MSMEs. Therefore, banks had raised this issue with the finance ministry and recommended the change, which has now been accepted.
Announced as part of the Rs 20.97-lakh-crore government economic package to tackle the impact of Covid-19, the scheme will now be applicable for companies with an annual turnover of Rs 250 crore against the earlier Rs 100 crore.
Banks and non-banking financial companies (NBFCs) have approved loans worth about Rs 1.37 lakh crore while disbursement stood at Rs 87,227 crore at the end of July 29.
The overall ceiling for the scheme remains at Rs 3 lakh crore and the validity of the scheme is till October, he added.
On May 20, the cabinet had approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent through ECLGS for the MSME sector.
Under the scheme, 100 per cent guarantee coverage will be provided by the National Credit Guarantee Trustee Company for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency borrowers in the form of a guaranteed emergency credit line (GECL) facility. For this purpose, a corpus of Rs 41,600 crore was set up by the government, spread over the current and next three financial years.
The scheme will be applicable to all loans sanctioned under the GECL facility during the period from the date of announcement of the scheme to October 31 or till the amount of Rs 3 lakh crore is sanctioned under GECL, whichever is earlier.
