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The Finance Industry Development Council (FIDC) has urged the government to include all loans given to individuals for purchasing vehicles for commercial purpose under the Emergency Credit Line Guarantee Scheme (ECLGS).
The move would help individuals who have purchased vehicles on loans to use them as taxis and trucks. It can also cover construction equipment vehicles purchases, said the FIDCs.
In a letter to Finance Minister Nirmala Sitharaman, the FIDC has said a clarification on the issue would help non-bank finance companies (NBFCs) to provide additional credit support to millions of MSMEs. “Right now, they are in dire need of working capital to restart their operations and we commit that it will lead to very large coverage of MSMEs though for small amounts of loans ranging from ₹1 lakh to ₹5 lakh towards 20 per cent of their outstanding as on February 29, 2020,” the letter noted.
The FIDC has also been in talks with the National Credit Guarantee Trustee Company (NCGTC) on the issue.
“We wish to clarify that all eligible borrowers (business enterprises, MSMEs constituted as proprietorship, partnership, registered company, limited liability partnerships, trusts and society or any other legal entity and including individuals, in the case of loans covered under MUDRA scheme) who have availed loans against vehicles (including construction equipment vehicles, taxis) which are registered for commercial purposes are eligible for assistance under ECLGS,” Durgesh Pandey, CEO, NCGTC, has already said in a letter to all banks, financial institutions and NBFCs.
The FIDC has argued that the clarification only covers loans covered the MUDRA scheme.
“We give loans every month ranging from ₹3 lakh to ₹4 lakh to ₹25 lakh for purchase of these assets but most of these loans are not refinanced under MUDRA scheme either on account of the loan amount being over ₹10 lakh or the interest spread being higher than mandated to cover the higher operating costs and credit losses,” it noted, adding that all these loans are disbursed exclusively for purchase of vehicles used for commercial purposes and create employment in the informal sector.
The ECLGS seeks to provide additional credit of up to ₹3 lakh crore at low cost to help MSMEs meet their operational liabilities and restart their businesses.
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