The Center announced on Monday an additional Rs 1.5 lakh crore for the Emergency Credit Line Guarantee Program (ECLGS), which will facilitate loans through microfinance institutions to 25 lakh people.
Finance Minister Nirmala Sitharaman said, while announcing the program, that the guarantee would be given to commercial banks planned for loans to non-bank finance companies or new or existing microfinance institutions, on loans of up to 1.25 lakh rupees to around 25 lakh borrowers.
The overall ceiling of the eligible guarantee will drop from Rs 3 lakh crore to Rs 4.5 lakh crore, she informed.
4 Credit guarantee system to facilitate loans to 25 Lakh people through microfinance institutions (MFIs)
Banks’ interest rate will be capped at MCLR plus 2%, Ms. Sitharaman said.
The maximum loan term will be three years and 80 percent of the aid will be used by microfinance institutions for additional loans.
She said ECGLS was announced as part of the Atma Nirbhar Bharat package, which was announced in May 2020.
Sectoral details of the program will be finalized as needs evolve, Ms. Sitharaman told media.
The contact-intensive sectors have already been covered by the program and will continue to be, said the finance minister, adding that already 4,000 crore rupees had been paid to these sectors through this window until. ‘now.
It is proposed to raise the limit of eligible collateral and loan amount beyond the current level of 20% of the outstanding amount of each loan.
The government is focusing on new loans, not paying off old loans, Sitharaman said.
All borrowers, including defaulters up to 89 days, are eligible to apply for loans under the program, the minister added.
A guarantee of up to 75 percent of the default amount for up to three years will be given by the National Credit Guarantee Trustee Company, but no guarantee fee will be charged by the company.