Tuesday, May 26, 2020

MSME: Guaranteed Emergency Credit Line (GECL Loan)

The GECL is a loan product announced by the Government as a measure to help fund business activities of the MSME sector during the months affected by the onset of the Covid-19 outbreak in India.

Salient Features

Type of Facility: Additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs) - such lenders are referred to as Member Lending Institutions (MLIs)

Limits: Up to 20% of the borrower’s total outstanding credit. Additional credit under the scheme to be capped at Rs. 5 crore.

Type of Borrower: Eligible MSMEs including business enterprises constituted as Proprietorships, Partnerships, Companies, Trusts, LLPs, and borrowers under PMMY.

Tenure: 4 years from date of disbursement

Moratorium: 1 year on the principal amount where interest is payable - Principal to be repaid in 36 months after moratorium

Guarantee/Collateral: 100% guarantee by National Credit Guarantee Trustee Company (NCGTC); no additional collateral to be given

Pre-Approved Loan: An offer will go out from the MLI to the eligible borrowers for a pre-approved loan which the borrower may choose to accept. If the MSME accepts the offer, it will be required to complete requisite documentation. An ‘opt-out’ option will be provided to eligible borrowers

Period of Disbursement: Applicable to all loans sanctioned under GECL from 23-May-20 to 31-Oct-20 up to a total sanctioned amount of Rs. 3 lakh crore

No. of Lenders: In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or multiple lenders

Eligibility Criteria

(i) Outstanding as on 29-Feb-20: MSME borrower accounts with combined outstanding loans across all MLI's of up to Rs. 25 crore

(ii) Turnover: Annual sales turnover of up to Rs. 100 crore in FY 2019-20

(iii) Existing Customer of Lender Bank: Borrower should be an existing customers of MLI

(iv) Non NPA Account: Borrower accounts should be classified as Regular, SMA-0 or SMA-1

(v) GST Registration: Borrower must be GST registered, if mandatory for it to register

Interest Rates

- For Banks and FIs, lending rate linked to one of the benchmark rates by RBI +1%
- The interest rate from Banks to not exceed 9.25% p.a.
- For NBFCs, the interest rate shall not exceed 14% p.a.
- No additional processing fee shall be charged
- No penal interest for prepayment