“The request from the NBFCs
side was that there is a need to include individuals who own vehicles that are put to commercial use, small traders and businessmen who borrow on individual names in this scheme as they are a part of the MSME network. We have made a request that individuals should also be allowed to take working capital loans so that whole MSME ecosystem can be kick-started,” said Ramesh Iyer, vice-chairman and managing director of Mahindra & Mahindra Finance.
He said the ministry agreed to review their suggestions. A ministry official said the government was looking to issue clarification to include some of these classes of borrowers under the scheme in the next few days.
The banks also wanted the ministry to increase the scope of the scheme to make it in consonance with the new definition of the MSMEs, which was recently accepted by the Centre. For instance, any company with an annual turnover of up to Rs 100 crore would be eligible for funding under the scheme. The government recently revised the definition of ‘medium enterprises’, which will now be firms with an annual turnover of Rs 250 crore, as against Rs 5 crore previously. “We are examining the request to broaden the scope of the scheme,” the ministry official said.
Another demand by lenders was to allow companies with outstanding credit of up to Rs 100 crore as of February 29, 2020, to be a part of the scheme, as against Rs 25 crore at present.
Under the scheme, the government will provide guarantee for any losses suffered by banks due to non-payment by the borrowers for all loans sanctioned till October 31, 2020, or till the time the limit of Rs 3 trillion is reached, whichever is earlier. The cap on interest rate for banks is at 9.25 per cent, whereas for NBFCs, it is 14 per cent per annum.
The participation from NBFCs
and banks to ECLGS was slow in the initial days and the government has now told them to expedite sanctioning of loans under the scheme. So far, 18 private sector banks
and 12-13 NBFCs
have become a part of the scheme.
The ministry official said state-owned banks had sanctioned Rs 30,000 crore to over 800,000 firms under the scheme, of which Rs 16,000 crore had been disbursed so far.