The Government of India has extended the Emergency Credit Line Guarantee Scheme that helps the business cope with the adverse effects of the pandemic. This particular scheme was going to expire on the 30th of September 2021. This particular scheme helped nearly 1.15 crore micro, small and medium enterprises.
On the 24th of September, this loan sanctioned under the guarantee scheme crossed nearly Rs. 2.86 lakh crore with 95% of the guarantees that the Government of India issued to sanction the loan to these small and medium enterprises. Moreover, according to the finance minister, the government demanded various stakeholders and industry bodies to continue this scheme. It provides valuable support to medium and small business organizations and helps them cope with the cruel effects of covid-19.
GECL loan important for small business organization
After the extension of this particular governmental scheme, the Government of India made certain modifications and changes to the scheme. Some of these changes include:
- The existing board was under the Emergency Credit Line Guarantee Scheme 1.0, and 2.0 would get the additional support of 10% credit from the total credit outstanding. However, the term of this additional support would be on the 29th of February 2020 for the 31st of March 2021, whichever would be higher.
- A business with no history of assistance from the Emergency Credit Line Guarantee Scheme can take credit support. This support would be 30% of the total credit outstanding due on the 31st of March 2021.
- Businesses in the certain sectors mentioned in the emergency credit guarantee scheme m can support this credit scheme and avail the support of up to 40% of the total outstanding. But sectors must not previously involve themselves in any credit support to get this particular scheme.
- However, small and medium enterprises can go for incremental credit within the limit. Sectors whose eligibility criteria increased because of the alteration in the cut-off date can avail of the credit. Accordingly, the borrowers who receive the assistance of the guarantee scheme under the GECL loan would be eligible for incremental support.
With the view to support different business organizations that got impacted due to the second wave of the covid-19 situation, the emergency credit land guarantee scheme guarantees an amount of Rs. 4.5 lakh crore. Due to the few modifications that the government of India made on this particular scheme, change to the coverage of the scheme. Such modification ensures that the business can cope with the adverse impact of the covid-19 situation. It also ensures collateral-free liquidity to the medium and small enterprises. It also provides much-needed support to every emergency credit land guarantee scheme borrower. Mostly these borrowers consist of the micro, medium and small business units.
However, with the extension of the repayment period, the borewells can enjoy the long repayment tenor of the subsequent 36 months. During the first twelve months, the borrowers need to pay the interest. However, depending upon the amount, the borrowers would receive a five-year repayment period in the first 24 months. They would have to pay the interest, and for the next 36 months, they need to pay the principal along with interest. One can easily use the Emergency Credit Line Guarantee Scheme with such a loan tenor.
Since the launch, the Emergency Credit Line Guarantee Scheme extended its monetary relief to various medium and small enterprises. Due to its low MSME loan interest rate, this particular scheme allows eligible borrowers to meet the operational liabilities while restarting the business.