Lenders want credit scheme to cover securitised loans

Mumbai: Banks and non-bank lenders have urged the finance ministry to allow the Emergency Credit Line Guarantee Scheme (ECLGS) to cover customers whose loans have either been securitised or directly assigned to banks.Lenders have also requested that they be allowed to extend this scheme to borrowers of those banks and NBFCs that were capital-starved and unable to extend credit to even customers with a good rating. This, they say, would allow effective flow of liquidity to small and marginalised borrowers.The government has announced this credit-guarantee scheme to encourage banks and NBFCs to lend to micro, small and medium enterprises (MSMEs) that are badly hit by the Covid-19 pandemic and the lockdown. Currently, a lending institution can offer the scheme only to its existing customers.Financial institutions have also sought that the Covid-19 emergency line be extended to cover 20% of the original exposure of the borrower instead of the outstanding loan at the end of February 29.“Customers are asking for 20% fresh working capital loan on original exposure and not on principal outstanding as of February 29, as prescribed by the government. We have seen that the loan amounts are very small in case of low-ticket loans which have 2-3 years’ tenor. Such a relief can be allowed by the government without it being a huge burden,” said an official who is aware of the request made to the finance ministry. “Also, we have seen some fintech lenders and small private banks have been unable to extend relief to their borrowers; so, this scheme should not be restricted to existing borrowers.”Several representations have been made to the finance ministry and a positive response is awaited, the official said.Lenders Want Scheme to Cover Securitised LoansThese issues were taken up during a meeting that finance minister Nirmala Sitharaman held on June 15 with officials of banks and NBFCs.The Cabinet had approved the scheme on May 21. Under it, the National Credit Guarantee Trustee Company provides 100% guarantee on up to Rs 3 lakh crore of additional credit at a concessional rate of 9.25% the MSME sector.Lenders have sought also that the scheme be extended to cover individual borrowers as well, rather than only businesses with a turnover of up to Rs 100 crore.“Most micro entrepreneurs are family or individually managed businesses run through informal employment structures,” Magma Housing Finance chief executive Manish Jaiswal said. “The ECLGS scheme needs to explicitly include all such entrepreneurs like a lorry driver, taxi operator or small service enterprises so that these small businesses, which form the backbone of the nation, get business-restart capital to crank up now that the lockdown is gradually lifting.”Companies have, meanwhile, sought extension of another scheme that allows a 2% interest subvention for MSMEs through Small Industries Development Bank of India. Renewal of the scheme will provide relief to entrepreneurs given the business disruption and cash-flow stress.As of June 11, public sector banks have sanctioned loans of Rs 29,490.81 crore under the ECLGS. Out of this, Rs 14,690.84 crore had already been disbursed. More than a dozen private banks and NBFCs have also recently started disbursing loans under this scheme.

from Economic Times https://ift.tt/2Bbc5yG