Emergency Credit Line Guarantee Scheme Flashcards
Why was it launched?
launched as part of the Aatmanirbhar Bharat Abhiyan package announced in May 2020 to mitigate the distress caused by coronavirus-induced lockdown, by providing credit to different sectors, especially Micro, Small and Medium Enterprises (MSMEs).
Under the scheme 26 most stressed sectors identified by K.V.Kamath committee have been identified.
What is objective?
To provide fully guaranteed and collateral free additional credit to MSMEs, business enterprises, MUDRA borrowers and individual loans for business purposes to the extent of 20% of their credit outstanding as on 29th February, 2020.
100% guarantee coverage is being provided by the National Credit Guarantee Trustee Company, whereas Banks and Non Banking Financial Companies (NBFCs) provide loans.
Eligibility?
Borrowers with credit outstanding up to Rs. 50 crore as on 29th February, 2020, and with an annual turnover of up to Rs. 250 crore are eligible under the Scheme.
Outstanding Balance
An outstanding balance is money you borrow but don’t repay in full when it becomes due. The lender uses the amount to calculate how much interest you owe for that statement period. Credit bureaus also base your credit worthiness, in part, on any outstanding balance you have. The closer the debt is to your borrowing limit, the more you are considered a financial liability.
Credit
Credit is money in an account that is available for you to use. In accounting, deposits are categorized as credits. The payments you make on loans also are classified as such. As they do with outstanding balances, credit bureaus also look at how you maintain your credit with lenders. Paying your balance in full with every statement keeps your credit at its maximum and gives you a high score
What is Tenor of loans provided under the Scheme?
four years, including a moratorium of one year on principal repayment.
What is moratorium Period: this is a postponement, not a waiver.
RBI’s wordings clearly say that the tenor for term loans across the board may be shifted by three months. This essentially means the loan will end 3 months later than was originally slated.
What is National Credit Guarantee Trustee Company Ltd?
private limited company incorporated under the Companies Act, 1956 in 2014, established by the Department of Financial Services, Ministry of Finance, as a wholly owned company of the Government of India, to act as a common trustee company for multiple credit guarantee funds.
Credit guarantee programmes are designed to share the lending risk of the lenders and in turn, facilitate access to finance for the prospective borrowers.
