Banks extending emergency loans to salaried, entrepreneurs after rate cut

Most public sector banks are offering Covid-19 Emergency Credit Line
With the Reserve Bank of India cutting benchmark rates sharply and also allowing banks to defer EMIs, banks are slowing gearing up to lend to various sectors, including the salaried and entrepreneurs. And with the loss/fall in income, and even jobs coming under threat, there would be many who would be seeking such loans to navigate through these tough times. Adhil Shetty, CEO,, says: “With pandemic-related job losses and the possibility of a recession looming, banks are worried the default rate on unsecured loans could skyrocket. Despite this, many have indicated their willingness to help with special emergency loans.

For the salaried: Padmaja Chunduru, managing director, Indian Bank, says: “We have launched products across categories, not just for corporate, or MSME, but even emergency salary loans, loans for pensioners and self-help groups.” The bank’s retail salary loan is called IND-COV Emergency Salary Loan. Under this scheme, you can avail of a loan up to an amount equivalent to 20 times your latest monthly gross salary up to Rs 2 lakh. To be eligible for the loan, you need to have a salary account with the bank. In case you are a home loan borrower of the bank, you can avail of this loan, even if you do not a salary account. 

Adds Chunduru: “Even if you don’t have an existing banking relationship, you can avail the emergency salary loan, if you have a guarantor for the same.” A guarantor could either be your spouse or an employee belonging to your existing organisation. There is no processing fee. The interest being charged is 9.50 per cent for 36 months, including a holiday period of six months. Even Bank of India is extending loans to retail customers but in the form of a personal loan. The eligibility: Three times of last drawn salary up to Rs 5 lakh.


Small traders, business, self-employed, professionals:  Large corporates need loans as millions of households, and the economy depends on them. But to mitigate hardships of micro, small, and medium enterprises (MSMEs), most public sector banks are offering Covid-19 Emergency Credit Line (CECL). 

C M Minocha, head, credit policy and MSME, Union Bank of India says: “We are offering CECL scheme for MSME and corporates with the maximum amount at Rs 50 crore. For the small businessman, traders, self-employed, professionals (MSE borrowers), having an exposure up to Rs 5 crore in working capital limit and term loan, we have a separate scheme.” 

The loan can be used for meeting working capital requirements, making salary payments and other expenses. “Given that even a photocopy is unavailable, we will give borrowers adequate time to finish the documentation,” he added. 

Bank of Baroda’s emergency credit line is like short- term loan/demand loan to existing MSMEs is at 8 per cent and a maximum of Rs 200 crore. State Bank of India will provide up to Rs 200 crores for 12 months at 7.25 per cent. Keep in mind most banks are providing additional funding of 10 per cent of existing working capital limits or term loan.   

For pensioners: This is available for Indian Bank’s existing customers. They can get a loan of 15 times their monthly pension, and a maximum of Rs 2 lakh for meeting unforeseen expenses. 

This loan has a zero processing fee at 8.75 per cent interest.

However, most banks are offering these to their existing customers only. As Shetty says: “Lenders are hesitant to extend credit to new customers because of the difficulty associated with getting paper-based documentation and verification of new customers.” 

Of course, in the absence of these options, you may want to consider a short-term personal loan from your bank or a salary advance loan from a non-banking financial institution. 

Satyam Kumar, CEO, LoanTap says: “Advance salary loan is a form of short-term credit for salaried professionals. They can get up to 2.5 times their salary for 3-12 months. Another flexible line credit is an overdraft that provides customers with an option of multiple withdrawals and repayments.”

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