Centre may extend deadline for emergency capital loans

LOANS FOR SMALL BUSINESSES CAN CURRENTLY BE AVAILED OF TILL OCTOBER 31

NEW DELHI: The Union government may extend the October 31 deadline to avail the emergency working capital loan facility — worth a total of ₹3 lakh crore — for small enterprises and individual professionals to help them tide over the crisis triggered by the Covid-19 pandemic, according to two officials with direct knowledge of the matter.

The government has already extended the scope of the provision by enhancing eligibility criteria to include larger units and individual professionals such as doctors and chartered accountants. The proposal to continue the scheme beyond October is also under consideration, the officials said on condition of anonymity.

The Union Cabinet on May 20, 2020 approved an Emergency Credit Line Guarantee Scheme (ECLGS) for about five months ending October 31.The scheme provides for an easy additional working capital loan at a concessional rate of interest to an existing borrower who is not a defaulter. Finance minister Nirmala Sitharaman on Saturday expanded its scope at the request of industry in line with the revised definition of micro, small and medium enterprises (MSMEs) and the cap on funding under the scheme doubled from ₹5 crore to ₹10 crore. Apart from industrial units with turnover up to ₹250 crore (earlier cap was ₹100 crore), the finance minister extended the facility to individual professionals.

HT reported the development on Sunday.

The National Credit Guarantee Trustee Company Ltd (NCGTC), which issued the operational guidelines of ECLGS on June 2, said the interest rate under the scheme is capped at 9.25% per annum for banks and financial institutions. For nonbanking finance companies (NBFCs), the interest rate should not exceed 14% per annum. NCGTC is a wholly owned company of the Union government formed in March 2014 to act as a trustee for multiple credit guarantee funds.

Divakar Vijayasarathy, founder and managing partner at consultancy firm DVS Advisors LLP said, “With most of the states still under various stages of lockdown and vaccine expected only by the year-end, it would definitely make sense for the government to extend the deadline. Once the demand picks up, there would be lot more takers for this scheme.”

In the last two months, over ₹1.36 lakh crore, less than 50% of ₹3 lakh crore, was sanctioned by banks and NBFCs, and only ₹87,227 crore could be disbursed under the scheme. The government expects ₹1 lakh crore loan offtake by newly eligible individual professionals. Some headroom may still remain, which could prompt the government to extend the deadline, one of the officials quoted above said.

Kapil Rana, chartered accountant and founder of HostBooks Ltd, a cloud-based accounting platform, said the deadline should be extended as the pandemic situation has not completely normalised, and several people have not resumed their businesses. “Extension of the deadline will benefit to the SME’s [small and medium enterprises] who have not yet availed the facilities,” he said.

“The intention of the government was to provide ease in cash flow. However, till now, the sanction and disbursement are not up to the expected level,” he added.

Apparel Export Promotion Council (AEPC) chairman A Sakthivel, meanwhile, proposed removing the turnover criterion completely for exporters. “While turnover of exporters may seem large due to foreign exchange rate fluctuations, the thin margin on which they work and the perishable nature of their products make them vulnerable to any changes in export orders and delay in shipment, which is clearly evident during the ongoing crisis,” he said in a statement.