Credit Guarantee Scheme: All you need to know

On Thursday, Finance Ministry stated that banks have sanctioned loans of about Rs. 1.86 lakh crore to 50 lakh business units under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector.
Created On: Oct 5, 2020 21:42 IST
Modified On: Oct 5, 2020 22:11 IST
Credit Guarantee Scheme
Credit Guarantee Scheme

On Thursday, Finance Ministry stated that banks have sanctioned loans of about Rs. 1.86 lakh crore to 50 lakh business units under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector. Till September 29,2020, over 27 lakh MSME units have received approximately Rs 1,32,246 crore. 

As reported on 29.09.2020, by 12 Public Sector Banks, top 24 Private Sector Banks & 31 NBFCs, the total amount sanctioned to Non-Individual & individuals, under the 100% Emergency Credit Line Guarantee Scheme stands at Rs 1,86,469 crore, of which Rs 1,32,246 crore has already been disbursed to 27,09,027 borrowers, as per the Finance Ministry. 

The Finance Ministry further stated that till September 25, 2020, banks have approved the purchase of a portfolio of Rs 25,505 crore, and Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs, HFCs and MFIs to do fresh lending to MSMEs and individuals. Also, the lenders are currently negotiating for additional Rs. 3,171 crore. 

During the current Financial Year, the Income Tax Department has so far issued Rs. 1,18,324 crore to more than 33.5 lakh taxpayers since April 1, 2020, as Income Tax Refund. 

Under Aatma Nirbhar Bharat Package, the due date of all income tax returns for FY 2019-20 is extended to November 30, 2020. The date of assessments is also extended to December 31, 2020. The period of Vivad se Vishwas Scheme was also extended to December 31, 2020. Legislative amendments to these announcements were introduced in The Taxation and Other Laws (Relaxation and Amendment of Certain provisions) Bill, 2020. The Bill was introduced on September 18, 2020, in Lok Sabha and has become an Act on September 29, 2020, after the assent of President Kovind. 

As on September 30, 2020, 39 proposals amounting to Rs. 11,120 crore under the Rs 30,000 crore Special Liquidity Scheme for NBFCs/HFCs/MFIs have been approved. Out of the sanctioned amount, Rs. 7,227 has been disbursed, Rs. 182 crore couldn't be availed and Rs. 3,707 have lapsed. The scheme was closed on September 30, 2020. 

For ease of doing business through Insolvency and Bankruptcy Code related measure, the government has raised the threshold of default under section 4 of the IBC, 2016 to Rs 1 crore from the existing threshold of Rs 1 lakh in June, in a notification dated 24.6.2020. 

Insolvency and Bankruptcy Code (Second Amendment) Act, 2020 has been notified on September 23, 2020, with effect from June 5, 2020. The defaults of the corporate debtor that occur from March 25, 2020, till the end of the period of suspension can avail of this benefit.

The defaults between March 25, 2020, till the completion of the suspension period, will remain as non-est for the purpose of initiation of CIRP under the Code as a permanent carve-out.

The Credit Guarantee scheme is the biggest fiscal component of the Rs 20 lakh crore relief package announced by Finance Minister Nirmala Sitharaman to ease the COVID-19 distress. 

Under the scheme, 100% guarantee coverage will be provided by the National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers in the form of a guaranteed emergency credit line (GECL) facility.

For this purpose, a corpus of Rs 41,600 crore was set up by the government, spread over the current and next three financial years. The scheme will be applicable to all loans sanctioned under GECL facility during the period from the date of announcement of the scheme to October 31, 2020, or till the amount of Rs 3 lakh crore is sanctioned under GECL, whichever is earlier.

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