The National Democratic Alliance (NDA) government has announced that it would be pushing the dead line for businesses to seek sovereign-guaranteed loans under the Emergency Credit Line Guarantee Scheme (ECLGS) for a month till November 30.

The finance ministry announced in a statement that it would stretch the scheme till the end of November or until the time when an amount of Rs. 3 trillion is sanctioned under the Scheme, whichever is earlier. However, the estimated raise in demand due to the ongoing festive season and the view of opening up of various sector in the economy, the scheme, in place from May 23 had a deadline of October 31 which is now shifted to November 30.

This Scheme bring in 100 percent guarantee coverage that is being offered by the National Credit Guarantee Trustee Company for additional funding to the tune of Rs. 3 trillion to borrowers. Alongside, the banks also provide a fully guaranteed and collateral free additional credit to micro, small, and medium enterprises, businesses, individual loans for business purposes and Mudra borrowers, to the range of 20 percent of their credit outstanding as of February 29, 2020.

Despite the sanctioning target has been set at Rs. 3 trillion till date, the banks have sanctioned loans worth close to Rs. 2 trillion, under the scheme. However Rs. 1.48 trillion has been laid out for the use of business purpose.

In addition to this, the interest rates for loans under this scheme are capped at 9.25 percent for banks and other financial institutions and about 14 percent are set for the non-banking financial organizations. The tenor of loans offered under the scheme in four years, including a moratorium of one year on principle repayment.

Localised lockdowns, coupled with lack of demand in the economy were seen as reasons behind lower-than-expected sanctioning of loans by the finance ministry, according to a senior government official.