MUMBAI: Non-bank lenders have sought inclusion of loans to individuals under the government sponsored Covid emergency credit scheme as more than two third loans of tiny and small enterprises are availed under the name of individuals and not under the corporate structures.
In the absence of not bringing individuals under the guarantee, the programme could not benefit the intended segment and might be cornered by those bigger ones with better financial strength.
More than 75% of our customers take loans in their individual names as they don’t have any business establishment or partnerships,’’ said a letter written to the finance minister by industry body Finance Industry and Development Council. ``They conduct their business in their individual names. We request you to considering including all loans given to individuals for purchase of vehicles including construction equipment and taxis which are registered for commercial purposes as eligible for assistance under the ECLGS.”
In a letter dated July 2, the National Credit Guarantee Trustee Company, the nodal body implementing the credit guarantee scheme had clarified that only those vehicle loans covered under the Mudra scheme are eligible to avail this benefit.
On May 21, the Cabinet had approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25% through Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector.
"While the proposed inclusion would help NBFCs to maiNBFCs to maintain asset quality, any potential abuse of the system too could be nipped in the bud," said an NBFC executive. ``There are many entities in smaller towns and cities where they run business with everything on promoter's name.
Under the scheme, 100% guarantee coverage are being provided by 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.
Separately banks and NBFCs have also urged the finance ministry to allow the ECLGS to cover customers whose loans have either been securitised or directly assigned to to banks. Lenders had 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 had 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.
Latest Finance Ministry data shows that banks have sanctioned Rs.1.1 lakh crore worth of loans as on July 1, of which Rs 52,255.53 crore have been disbursed under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector.