Covid-19 loan scheme

The lockdowninduced by the Covid-19 pandemic has proved a tsunami for businesses, be it bigor small. Every sector of economy has been hit where earnings have eitherdrastically come down or have stopped flowing in. We have witnessed huge lossof jobs and at the same time, most of the small businesses stand on the vergeof collapse.

For example,small businesses in retail segment are helpless amid crumbled operations due tothis deadly human consuming coronavirus outbreak. As per a survey by the retailtrade body Retailers Association of India, small retailers are likely to layoff 30 per cent of their employee strength ahead while medium retailers areexpected to cut 12 per cent of their manpower. To sustain the onslaught ofCovid-19 pandemic, the small business desperately seek support for salarycomponent of their units, a larger amount for sustaining business, relief ininterest rates, and a better moratorium for EMI (equated monthly installments)repayments.

   

Precisely,small and medium retailers need a strong financial support from the government.These businesses are in need of more working capital to sustain and bear theirfixed costs etc. to keep going. Some of them may be earning revenues, some ofthem not depending on the sector. Here it’s the role of banks to intervenethrough tailor-made schemes to let these crumbling businesses rebuild and stayalive.

As far asthe scenario in J&K is concerned, the challenges thrown by the COVID-19pandemic are not different. In fact, these assume serious dimensions as theregion has been witnessing worst economic scenario, especially since August2019 when Article 370 was scrapped. All sectors of the economy particularlytourism, hospitality, transport, retail, construction, entertainment and othershave been severely impacted. The outbreak has also impacted manufacturingsectors due to large scale factory shutdowns and shortage of raw materials andcomponents.

It’s hereJ&K Bank, which is a lead bank in the region, rolled out a tailor-madeCovid 19 Working Capital Demand Loan (CWDL) Scheme to help the businessesto stay alive amid this unprecedented pandemic situation. The scheme ishassle-free wherein additional facilities to the extent of 10% of existing fundbased working capital limit are extended to the borrowers for meeting theiremergent business requirements.

What’s the nature of Covid 19 Working Capital Demand Loan (CWDL) Scheme?

The Scheme,launched by the J&K Bank for its customers, is a demand loan scheme. Thepurpose of the facility is to help the borrower to meet the temporary liquiditymismatch arising out of Covid-19 pandemic. It’s available for a limited period,upto June 30, 2020 and shall stand withdrawn thereafter. In other words, loansunder the scheme can be sanctioned & disbursed only upto 30.06.2020.

Who are eligible to avail the facility?

All existingborrowers of the bank availing working capital facilities (CC/SOD) which arestandard & have not been classified as SMA-1 or 2 as on 16.03.2020 areeligible to avail benefits under the scheme. Notably, the businesses shouldhave been impacted by COVID-19 pandemic.

Borrowersavailing working capital from the bank under Multiple Banking Arrangement (MBA)can avail the facility subject to production of NOC from other lenders underMBA.

What is the amount of loan granted under the facility?

The loanamount would be 10% of the existing Fund Based Working Capital Limit (FBWC)subject to a maximum of Rs 20.00 crores. Notably, the limit will be over andabove the existing assessed Bank finance.

Since thefacility is for a limited period, the loan granted under the scheme is to berepaid in six equated monthly installments after initial moratorium period of06 months from the date of first disbursement of the loan.

What about the application of interest during the period of moratorium?

The interestapplied in the accounts is to be recovered on actual basis from the borrower asand when applied. In line with the RBI instructions the recovery of interestapplied till May 31, 2020 shall be deferred. The accumulated accrued interestshall be recovered immediately after the completion of this period.

Remarkably,the rate of interest at the moment charged on this facility is as low as 8.35%.

What is nature of security which the borrower has to offer for availing the facility?

The facilitywould be granted on extension of charge on existing primary/ collateralsecurity.

Are private educational institutions eligible for the scheme?

Yes. Thebank has devised a separate scheme for private educational institutions inJ&K to help them to meet the temporary cash flow mismatch arising out ofCovid-19 pandemic.

Allgovernment registered/recognized private educational institutions maintainingtheir accounts with J&K Bank & whose cash flows have been impacted byCOVID-19 pandemic are eligible to avail the benefits under the scheme. However,the loan limit is restricted to Rs.One crore, where minimum finance is Rs.5.00lakhs. The quantum of finance is linked to 06 months total expenditure towardssalaries to staff & other miscellaneous expenditures.

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