With the coronavirus pandemic causing nationwide lockdownand affecting businesses, the government has decided to pitch in with itssupport for the corporate sector to prevent any liquidity problems for them.
The Centre has asked banks to be ready to extend emergencycredit lines on easier terms to corporate borrowers so that business activitydidn’t suffer on account liquidity squeeze. It has discussed the issue with theReserve Bank of India (RBI).
The State Bank Of India (SBI) has already come out with anad hoc loan facility ‘Covid-19 Emergency Credit Line (CECL)’, which is aimed atmeeting the temporary liquidity mismatch caused by Covid-19 effects.
Three other public sector banks — Union Bank, Indian Bankand Bank of India — have also come out with emergency credit lines to largelysupport fund needs of SMEs.
“More banks will come with such schemes given thatsmall and medium businesses are taking the brunt of lockdowns most and facing asituation where they may have to go for massive cost cutting as well aslayoffs,” said a government source.
The SBI emergency credit line will remain operational tillJune 30. A borrower can get maximum loan of Rs 200 crore or 10 per cent of theexisting fund-based working capital limits, by paying fixed 7.25 per centinterest.
The credit line will remain open for a year and repaymentstarts only after six months in six instalments. The emergency loan facility isaimed at helping MSME borrowers.
The schemes of other three banks are also similar.