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What is the Emergency Credit Line Guarantee Scheme announced by Sitharaman?

TEAM HS by TEAM HS
August 18, 2020
in Business, Politics
0
Sitharaman tells the bank to target the funding needs of other businesses

What under the new announcement?

Finance Minister Nirmala Sitharaman urged state banks on Tuesday to help other businesses with debt requirements as the national lockdown is halting economic activity and slowing growth this year.

Sitharaman asked borrowers to focus on lending to small businesses under the recently announced Emergency Credit Line Guarantee Scheme in a meeting with heads of government banks. 

PSBs approach eligible micro, small, medium enterprises with a focus on accreditation that aim to meet the credit needs of other businesses.

Emergency Credit Line Guarantee Scheme
Close up of a person paying for something in Indian rupees.

Lenders reviewed the Emergency Credit Line Guarantee Scheme at the video conference including potential lenders, beneficiaries, borrowers, and lending status.

Banks lend to businesses but these have not been allowed to lend for businesses that are looking to start a new business. This is the primary reason for banks to leave residue funds in the central bank.

Why this scheme?

Emergency Credit Line Guarantee Scheme is part of the Rs20 lakh crore financial packages announced by the government to deal with the Covid-19 crisis. This collateral loan is payable to small businesses with rent, salary, and restocking.

It encourages non-bank and bank lenders to provide additional financing to small lenders with a 100% guarantee of any loan. Guarantee cover is available for term loan facilities and additional working capital with the credit limit up to ₹25 crores. 

The Finance Minister complimented the public sector banks who settled a barrier under the Emergency Credit Line Guarantee Scheme. It proposes to simplify the formalities and maintain active reorganization at the branch level and customs of the forms under the Emergency Credit Line Guarantee Scheme. 

Emergency Credit Line Guarantee Scheme

A senior official at a public sector bank said that lending to other businesses under the Emergency Credit Line Guarantee Scheme, credit interest will be reduced because it depends on how quickly financial activity will improve. 

The sharp decline in economic activity will lead to 0-1 percent debt growth caused by the spread of COVID-19. The credit rating agency and its financial consequences demand and discretional spending are unprecedented which can slow down credit redemption.

How opposition reacted to this?

Meanwhile, the opposition accused the RBI to hit the inactive economy and is not happy with the proposed fund transfer. Congress leader Rahul Gandhi said Finance Minister

Emergency Credit Line Guarantee Scheme

Nirmala Sitharaman and Prime Minister Narendra Modi are unsure on allegations of self-created financial disaster and accused him of stealing money from the Reserve Bank of India.

On this statement by Rahul Gandhi, Sitaraman replied that the Congress should consult with its own senior leaders and finance ministers before making any allegations about the Reserve Bank. We do not want to worry too much about this as they are experts in making allegations.

Conclusion:

Prime Minister Narendra Modi and his cabinet team are trying their best to rebuild the crashed economy of India. For which they are coming with new schemes every time to support each and every sector that affects the Indian economy.

Tags: Finance Minister Nirmala SitharamanNirmala Sitharaman
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