Govt tells banks to ready emergency credit lines for SMEs

Daniel Fowler
March 29, 2020

As economists and rating agencies flag uncertainty on the extent of the impact of COVID-19, and the consequent curbs on economic activity, most state-owned lenders have extended emergency funding lines to companies, especially small and medium enterprises. The second person cited above said Bank of India will offer three times the take-home salary of its home loan borrowers as a top-up loan, up to ₹5 lakh, to help during the pandemic.

Public sector banks with about 80 percent of banking operation have taken steps to ensure the safety of its staff and uninterrupted banking services to customers.

Indian Bank has also announced 5 special emergency loans for its customers. We expect that these credit lines willmeet the immediate liquidity requirements of businesses,"Indian Bank Managing Director Padmaja Chunduru said".

The SBI emergency credit line will remain operational till June 30. Union Bank of India MD & CEO Rajkiran Rai said that his bank was also allowing borrowers whose cash flows are hit by the Covid-19 lockdown to avail up to 10% of their existing working capital limit at reduced interest rates. The bank said no additional security was required for this facility.

Indian Overseas Bank launched MSME Product "COVID 19 Line of Support Scheme" for all MSME customers.

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All these relief measures have been announced by banks in consultation with the government and Reserve Bank of India, and more banks are expected to follow suit with similar schemes. The IND-COVID Emergency Credit Line would provideadditional funding of upto 10 per cent of the working capitallimits (both fund based and non-fund based limits) with amaximum limit of Rs 100 crore.

"The entire loan under the scheme has to be repaid within the maximum period of 12 months including moratorium from the date of first disbursal or validity of sanction, whichever is earlier", the circular said, adding that in case the limit is availed of in tranches then the repayment should be 12 months from the date of first disbursal. Under this, each member can avail of a soft loan of Rs. 5000 I.e., Rs. 1 lakh per SHG.

Banks' credit grew only 6.1% on year in the fortnight ended Mar 13-the slowest in almost 30 months, as per latest data by the Reserve Bank of India. Indian Bank is servicing 1.68 lakh SHGswith more than 22 lakh women beneficiaries.

Ind-Covid emergency salary loan will be given to salaried employees up to an amount equivalent to 20 times the latest monthly gross salary subject to a maximum of ₹2 lakh.

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