: RBI asks lending institutions to assign 'zero' risk weight on loans to MSME under ECLGS #FinanceIndia #StockMarketNEWS RBI asks lending institutions to assign 'zero' risk weight on loans to MSME

@StockMarketNEWS Tue 23 Jun, 2020

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RBI asks lending institutions to assign 'zero' risk weight on loans to MSME under ECLGS #FinanceIndia #StockMarketNEWS
RBI asks lending institutions to assign 'zero' risk weight on loans to MSME under ECLGS New Delhi, Jun 22 (KNN) The Reserve Bank of India (RBI) has asked lending institutions to assign zero per cent risk weight on the credit facilities extended under the Emergency Credit Line Guarantee Scheme to Micro, Small and Medium Enterprises (MSME).

"As credit facilities extended under the scheme guaranteed by NCGTC are backed by an unconditional and irrevocable guarantee provided by Government of India, it has been decided that Member Lending Institutions shall assign zero percent risk weight on the credit facilities extended under this scheme to the extent of guarantee coverage," the RBI said in a notification.

Lending institutions include banks, eligible NBFCs and HFCs, and All India Financial Institutions (SIDBI, NHB, NABARD, EXIM Bank).

Last month, Finance Minister Nirmala Sitharaman had announced the ECLGS, for the hard-hit MSME sector, which is the biggest fiscal component of the Rs 20-lakh crore Aatmanirbhar Bharat Abhiyan package.

Under the scheme, 100 per cent guarantee coverage will be provided by National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 3 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers in the form of a guaranteed emergency credit line (GECL) facility.

The government will also provide a corpus of Rs 41,600 crore for the scheme over the current and coming three financial years.

The main objective of the Scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs) to increase access to, and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by providing them 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers, the government said.

The collateral free loans are for those with Rs 25 crore outstanding loan or Rs 100 crore turnover. The tenure of the loan will be 4-year and moratorium of 12 months, said Finance Minister Nirmala Sitharaman.