Finance minister Nirmala Sitharaman asked state-run banks to help businesses with loan requirements, even as credit growth is expected to plunge this fiscal as the national lockdown had brought economic activity to a near halt. Finance Minister also asked lenders to continue their focus on sanctioning loans to small businesses, under the recently announced emergency credit line guarantee scheme (ECLGS).
ECLGS is part of the government’s ₹20 trillion financial package to tide over the covid-19 crisis. This collateral-free loan is expected to enable small businesses to pay for salaries, rent and restocking. It will also provide an incentive to banks and non-bank lenders to offer additional funding facility to small borrowers, by providing them 100% guarantee for any loan default. The guarantee cover will be available for additional working capital and term loan facilities up to 20% of the outstanding credit limit up to ₹25 crore as on 29 February.