Retailers, small businesses not registered as MSME also to get guaranteed emergency credit
MSMEs or business enterprises – constituted as proprietorships, partnerships, registered companies, trusts and limited liability partnerships (LLPs), as well as interested borrowers under Pradhan Mantri Mudra Yojna – would be eligible for the scheme.
Retail businesses devastated by the 62-day lockdown have been declared eligible for the scheme, although they are not recognised or registered as MSMEs.
Eligible borrowers should have annual turnover up to Rs 100 crore, exposure to bank credit.
In a circular issued on Tuesday, the National Credit Guarantee Trustee Company (NCGTC) clarified that MSMEs or business enterprises – constituted as proprietorships, partnerships, registered companies, trusts and limited liability partnerships (LLPs), as well as interested borrowers under Pradhan Mantri Mudra Yojna or PMMY – would be eligible for the scheme.
The Rs 3 lakh crore emergency credit borrowing scheme for Micro, Small and Medium Enterprises (MSMEs) announced by the govt on May 12 will also cover retailers and other businesses.
Guaranteed emergency credit will be available for retailers and other businesses too even if they are not registered as Micro, Small and Medium Enterprises (MSME), a senior Finance Ministry official said.
This could mean 7 crore traders, as per number given by the Confederation of All India Traders (CAIT), could avail loans through Emergency Credit Line Guarantee Scheme (ECLGS).
During pre-COVID-19 regime, these retailers were doing a daily business of around Rs 15,000 crore. CAIT estimates that during first 40 days of lockdown, these traders incurred loss of over Rs 5.50 lakh crore and it is expected to rise despite relaxation in trading activities post May 17 in many parts of the country.
“First presentation of Atmanirbhar Bharat mentioned Rs 3 lakh crore collateral-free automatic loans for Businesses, including MSMEs. Here the term Businesses cover all eligible even retailers,” a senior Finance Ministry official told BusinessLine. Eligible means a business with turnover up to Rs 100 crore and outstanding up to Rs 25 crore on Feb 29, 2020. Also, outstanding should not be for more than 60 days.
Guaranteed Emergency Credit Line (GECL) facility
In its meeting on May 22,The Cabinet approved Guaranteed Emergency Credit Line (GECL) facility to enable additional funding of Rs 3 lakh crore. Since then, a press release issued post Cabinet meeting mentioned facility to be made available to ‘eligible MSMEs and interested MUDRA borrowers,’ there were some issues related to traders (both retailer and wholesalers) as June 2017 Office Memorandum of MSME Ministry mentioned eight activities including wholesale and retail trade “would not be included in the manufacture or production of goods or providing or rendering of services in accordance with section 7 of the Micro, Small and Medium Enterprise Development Act, 2006.”
In other words, wholesale and retail trade will not be categorised as MSME, thus making things difficult for these businesses to avail benefit.
Finalising details
The official, quoted above, mentioned that Department of Financial Services (DFS) is finalising details of GECL facility which will help eligible businesses to avail guaranteed emergency credit. This issue came up for discussion during meeting of Public Sector Banks with Finance Minister Nirmala Sitharaman on May 22. Banks were asked to start lending at a cheaper rate.
GECL enables 100 per cent guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC). Interest rates under the Scheme will be capped at 9.25 per cent for banks and FIs, and at 14 per cent for NBFCs. Loan will be provided for four years with moratorium of one year on the principal amount.
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