Kerala Financial Corporation, a leading State Finance Corporation, has announced a one-year moratorium on principal to MSME enterprises and a proposal to restructure their loans as per Reserve Bank of India (RBI) guidelines to prevent such accounts from being categorised as non-performing assets.
The scheme is available to loans in the Standard Category till March 31, 2021, on the basis of applications from promoters received until September 30, 2021. No charges or additional interest will be charged for this facility, a spokesman for the financial institution said.
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Last year, the Corporation had sanctioned 20 per cent additional loan to customers whose repayments were prompt until March 31, 2020. The second wave of Covid-19 has once again affected the tourism sector and small industries. This has prompted it to offer another scheme for entrepreneurs in these sectors.
Additional loans, top-ups announced
They will be allowed an additional 20 per-cent top-up to their loan in addition to the 20 per cent provided last year, taking the lot cumulatively to 40 per cent, the spokesman said. The scheme has been formulated in line with the Emergency Credit Line Guarantee Scheme (ECLGS) offered by the Centre.
Loans by banks under the ECLGS are guaranteed by the National Credit Guarantee Trust Company. But this is not available to KFC, which has therefore formulated a scheme with more benefits for customers. So, while banks lend only 20 per cent of the outstanding balance in the customer’s account, the State financial corporation lends up to 20 per cent of the disbursed amount, thereby offering a higher amount.
Furthermore, while the Central scheme provides loans only to the tourism sector, Kerala Financial Corporation also includes small enterprises and the healthcare sector under the scheme. It also allows a 24-month moratorium on principal repayment. Since interest is payable during this period as well, customers will have the option of adjusting it against the loan.
The State Finance Minister had announced in the Budget 2021-22 that assistance would be provided to entities manufacturing products helping prevent the spread of Covid-19. Kerala Financial Corporation has come up with a new plan for such ventures, the spokesman said.
Assistance to fight Covid-19 spread
The scheme will be available to all sectors involved in Covid-19 prevention in the field of healthcare ranging from hospitals, laboratories, units involved in oxygen storage and distribution, manufacturing of ventilators, oxymeters, and other life-saving equipment.
Loans up to ₹50 lakh will be covered under the Chief Minister's Entrepreneurship Scheme at seven per cent with a tenure of five years. For loans above ₹50 lakh, the interest rate will be seven per cent up to ₹50 lakh and interest for the remaining portion will be fixed as per the rating of the entity. Repayment period available is up to 10 years. Up to 90 per cent of the total project cost will be financed under the scheme.
Interest rates slashed
Kerala Financial Corporation has slashed interest rates for loans to healthcare, tourism and MSME sectors with the minimum rate being reduced from 9.5 per cent to eight per cent. The higher-interest rate slab has been reduced to 10.5 per cent from 12 per cent. Interest rates are determined on the basis of the rating of the entity.
The lower interest rate is usually applied from the loan reset date (month of borrowing) of the respective enterprise. But it has been decided that on this occasion, the benefit of lower interest rate will be available to all eligible customers from July 1, 2021.
The Finance minister had also announced that the loan assets of the company would be increased from ₹4,700 crore to ₹10,000 crore in five years and that ₹4,500 crore will be sanctioned during this financial year.
The value of secured assets will be determined as per market value fixed by external valuers in line with the practice of most banks. The sanctioning power of district managers has been enhanced from ₹50 lakh to ₹2 crore. A special cell will be set up at the head office to expedite the approval and disbursement of loans to small entrepreneurs and startups.