The Centre’s move to enhance the overall limit of Emergency Credit Line Guarantee Scheme (ECLGS) by ₹1.5-lakh crore and its announcement of ₹7,500-crore credit guarantee to microfinance institutions (MFIs) for loans from banks echoed well with industry and microfinance players, which felt that these measures would encourage banks to lend more in these pandemic times.

Alok Misra, MFIN CEO and Director, said the credit guarantee scheme to MFIs will play a catalytic role in facilitating credit to MFIs and their customers in these difficult times.

“Of special mention is the coverage of term loans from scheduled commercial banks to MFIs unlike only CPs/NCDs in last year’s scheme, which will allow smaller MFIs to be covered. Other specific measures introduced in the scheme in terms of eligibility of standard customers, pricing directions, focus on new lending and guarantee up to 75 per cent of default amount will ensure that the scheme benefits the microfinance customers in a substantive way. MFIN is grateful that its suggestions as the Industry’s body and SRO were considered,” Misra said.

Sadaf Sayeed, CEO-Muthoot Microfin Ltd, said that the credit guarantee scheme will give the much-needed initiative to push credit growth in rural economy. This scheme is an improved version of PCGS of 2020, here the interest rates for banks are capped. This scheme is targeted at incremental lending, tenor can be up to three years, which was mostly 12-18 months last time. “Considering there is no moratorium this time, even loans up to 89 days past dues can be covered under this guarantee scheme, this will be a huge benefit for borrowers facing difficulty because of Covid,” Sayeed said.

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HP Singh, Chairman & Managing Director, Satin Creditcare Network Limited, said the announcement of the eight key relief measures will help generate employment, ease the burden of borrowers and give a boost to the revival and return to normalcy.

Reacting to the announcement of ₹7,500-crore credit guarantee to MFIs for loans from scheduled commercial banks at low rates (MCLR + 2 per cent), P Satish Executive Director of Sa-Dhan, said, “we are glad that the Finance Minister has taken a favourable view on our request to her in our last memorandum of April 28, 2021, for various relief measures for the MFIs affected by the second pandemic wave. Due to this credit guarantee, banks will have confidence and comfort to lend to microfinance institutions at reasonable rates during present challenging times. We are extremely happy as microfinance clients will have immediate access to loans once the lockdowns start easing and livelihood activities pick up.”