Retailers and small businesses not registered as MSMEs also benefit from guaranteed emergency credit

Guaranteed emergency credit will also be available for retailers and other businesses, even if they are not registered as micro, small and medium enterprises (MSMEs), a senior finance ministry official said.

This could mean that 7 crore traders, according to the number given by the Confederation of All Indian Traders (CAIT), could qualify for loans through the Emergency Line of Credit Guarantee Program (ECLGS).

During the pre-COVID-19 regime, these retailers were doing daily business of around Rs 15,000 crore. CAIT estimates that in the first 40 days of foreclosure, these traders suffered a loss of over Rs 5.50 lakh crore and is expected to increase despite the relaxation of trading activities after May 17 in many parts of the country. country.

“Atmanirbhar Bharat’s first presentation mentioned automatic unsecured loans of Rs 3 lakh crore for businesses including MSMEs. Here, the term Businesses covers all eligible retailers, even retailers, ”a senior finance ministry official told BusinessLine. Eligible means a business with a turnover of up to Rs 100 crore and an outstanding amount of up to Rs 25 crore on February 29, 2020. In addition, the outstanding amount should not exceed 60 days.

Guaranteed Emergency Line of Credit (GECL)

At its May 22 meeting, Cabinet approved the Secured Emergency Line of Credit (GECL) facility to provide additional funding of Rs 3 lakh crore. Since then, a press release issued after the Cabinet meeting mentioned a facility to be made available to “eligible MSMEs and interested MUDRA borrowers”, there were some issues related to traders (retailers and wholesalers) as the office memorandum of June 2017 of the Ministry of MSMEs mentioned eight activities including wholesale and retail trade “would not be included in the manufacture or production of goods or the supply or provision of services in accordance with Article 7 of the Law of 2006 on the development of micro, small and medium enterprises ”.

In other words, wholesale and retail trade will not be categorized as MSMEs, which will make it harder for these businesses.

MSME Minister Nitin Gadkari has already assured the business community to address its demand to include traders in the MSME sector as service providers.

Finalize the details

The official, cited above, mentioned that the Department of Financial Services (DFS) is finalizing the details of the GECL facility that will help eligible businesses qualify for guaranteed emergency credit. This issue was discussed at the meeting of public sector banks with Finance Minister Nirmala Sitharaman on May 22. Banks were told to start lending at a lower rate.

GECL allows the National Credit Guarantee Trustee Company Limited (NCGTC) to provide 100 percent guarantee coverage. Interest rates under the program will be capped at 9.25 percent for banks and FIs, and 14 percent for NBFCs. The loan will be granted for four years with a one-year moratorium on the principal amount.

To date, various banks charge interest between 10.55 and 16.25 percent, while for NBFC, the interest rate varies between 10 and 30 percent. The scheme would apply to all loans sanctioned under a new facility during the period from the date of the scheme’s announcement to October 31 or until an amount of Rs 3 lakh crore is sanctioned under the GECL, whichever comes first.

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