The INR 3 lakh crores of expected credit infusion to the MSME segment is set to be completed by end of October 2020. The size of this package is significant when compared with 2.8 lakh crores of MSME credit disbursal in the full calendar year of 2019. The Guaranteed Emergency Credit Line (GECL) facility is applicable to all MSME borrowers with industry-wide aggregate credit exposure up to INR 25 crores and industry-wide delinquency less than or equal to 60 days as of 29th Feb. 2020.
Eligible MSMEs can borrow up to 20% of their aggregate credit exposure. The loans have four-year tenor with the first 12 months of principal covered under moratorium to further assist MSMEs benefitting from the scheme. Additionally, the loans provided under the GECL have a 100% credit guarantee and this makes it a huge opportunity for lenders to plan their lending policies strategically.
Speaking on the analysis findings, Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL, said that the ECLGS package is well structured scheme which not only provides the much needed access to funds for deserving MSMEs but also ensures long term stability of the portfolio quality of lending institutions. Credit institutions have a large and important role to play during these unprecedented times to help boost economic opportunities for deserving MSMEs and refuel the economy. ECLGS has set the stage for an accelerated credit infusion into the MSME sector. However, credit institutions have to adapt to the increasing requirements of monitoring MSME credit.
Elaborating on the ECLGS analysis he added that in addition to 100% credit guarantee, the fact that over 80% eligible MSMEs have a ranking of CMR-6 or better makes ECLGS guidelines inherently cater for risk containment. However, in the rapidly changing market conditions, the dynamics of MSME businesses are evolving every day and therefore it's important to not only rely on original structural strength of MSME but to also regularly monitor borrower's behavior.
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