The Centre on Monday announced an additional Rs 1.5 lakh crore for emergency credit line guarantee scheme (ECLGS), which will facilitate loans through micro finance institutions to 25 lakh persons.
Finance Minister Nirmala Sitharaman said while announcing the scheme that the guarantee will be given to scheduled commercial banks for loans to new or existing non banking finance companies or micro finance institutions, on lending up to Rs 1.25 lakh to around 25 lakh borrowers.
Overall cap of admissible guarantee will be raised from Rs 3 lakh crore to Rs 4.5 lakh crore, she informed.
4 Credit Guarantee Scheme to Facilitate Loans to 25 Lakh Persons Through Micro Finance Institutions (MFIs)
Interest rate from banks will be capped at MCLR plus 2 per cent, Ms Sitharaman said.
The maximum loan tenure will be of three year and 80 per cent of assistance will be used by micro finance institutions for incremental lending.
She said that that the ECLGS has been announced as part of the Atma Nirbhar Bharat package, which had been announced in May 2020.
Sector-wise details of the scheme will be finalised as per evolving needs, Ms Sitharaman told media persons.
Contact intensive sectors have already been covered in the scheme and they will continue to be covered, the Finance Minister said, adding that already Rs 4,000 crore have been given to these sectors through this window so far.
The limit of admissible guarantee and loan amount is proposed to be increased above the existing level of 20 per cent of outstanding on each loan.
Government's focus is on new lending, not repayment of old loans, Ms Sitharaman said.
All borrowers, including defaulters of up to 89 days are eligible for seeking loans under the scheme, the minister added.
Guarantee of up to 75 per cent of default amount for up to three years will be given through National Credit Guarantee Trustee Company, however no guarantee fees will be charged by the company.