India To Expand Scope Of MSME Loan Guarantee Scheme
A weaver uses a handloom to make a silk sari at a workshop. The GST MSME software is available under ‘Download’ tab on the official GST portal, GSTN said in a statement. (Photographer: Dhiraj Singh/Bloomberg)

India To Expand Scope Of MSME Loan Guarantee Scheme

India will widen the scope of a government-guaranteed rescue package for small businesses, including raising the threshold to avail loans under the scheme, to help them tide over the coronavirus crisis.

According to the current structure of the Emergency Credit Line Guarantee Scheme, small businesses with turnover of up to Rs 100 crore can avail additional 20% of their outstanding loans up to Rs 25 crore as on Feb. 29. The government will now increase the threshold of loans from Rs 25 crore to Rs 50 crore, a statement by Financial Services Secretary Debasish Panda said.

That means the guarantee on loans provided to banks by the government will increase from Rs 5 crore (20% of Rs 25 crore) to Rs 10 crore (20% of Rs 50 crore), the statement said. The limit of turnover for small businesses to avail such loans also has been increased from Rs 100 crore to Rs 250 crore, in line with the revised definition of micro, small and medium enterprises, it said.

Under the scheme, the government provides 100% guarantee to banks on such loans that can be availed till Oct. 31. Banks assign zero percent risk weight on the credit facilities extended under this scheme.

About Rs 1.36 lakh crore has been sanctioned by banks under the scheme as on July 29. Of this, Rs 87,227 crore has been disbursed by banks, Panda said in the statement.

The government will also include loans given to individuals for business purposes under the scheme. The conditions laid out for the scheme would apply to such loans.

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