Said to be the biggest fiscal component of the Rs. 20 lakh crore ‘Atmanirbhar’ package, loans under the GECL scheme are collateral free and the repayments start after a year
In view of the COVID-19 situation prevailing in the country, banks in the State revealed that a total of Rs 66 crore of loans have been disbursed so far to local micro, medium and small enterprises (MSMEs) under the Guaranteed Emergency Credit Line (GECL) scheme of the Centre, as part of the economic package for businesses.
The information was shared at the state-level bankers committee meeting (SLBC) attended by heads of public and private sector banks, urban cooperative banks, and officials from the RBI, NABARD and the state government. Bankers at the SLBC agreed to actively seek out MSMEs in the state in need of funds and extend credit to them.
As per statistics furnished at the meeting, banks have sanctioned Rs. 223.02 crore under the GECL scheme out of which 29 per cent was disbursed. Further 3590 MSME units in the state till date benefitted from the scheme.
MSMEs have been assigned a key role by the government at the national level in the strategy to revive the economy for their ability to generate employment. The Centre has asked all banks to actively seek out MSME borrowers and help them to recover from the liquidity squeeze caused by the ongoing pandemic crisis.
Manguirish Pai Raiker, ASSOCHAM’s National Chairman of MSMEs, shares a small background of the MSMEs and why a loan is required to tide over these crucial times. “Before the lockdown came into force, things were just about fine and the situation was not absolutely hunky dory. When operations came to a sudden standstill, whatever was produced for customers was still lying the yards. Inventories which were purchased by the entrepreneurs, envisaging future orders in hand, had their money were tied up in production or in existing inventories. All MSMEs do not have funds in hand as far as reserves are concerned, unlike large industries that have money in their kitty.” Pai Raiker adds that after the lockdown was partially lifted there was no take-off, as not all companies had commenced operations. He also says that one can’t stand still and life has to move on. Much as recovery is slow, it is not sufficient to meet the needs so as to pay off their liabilities.
Pai Raiker then explains the role of the GECL scheme. “The funds are given to MSMEs as working capital. Though MSMEs had very little money with them, the banks, at the beginning of April, had deducted interest, as per their statute, on the loans which were taken by them. Plus staff salaries had to be paid and all statutory payments like electricity bill, water bill and GST had to be taken care of.” This GECL will allow MSMEs to kick start their operations and allow them to tide over a difficult period. He says the ones who are struggling to stay afloat are the ones who require this loan.
“The funds are given to MSMEs as working capital. Though MSMEs had very little money with them, the banks, at the beginning of April, had deducted interest, as per their statute, on the loans which were taken by them” MANGUIRISH PAI RAIKER, ASSOCHAM, National Chairman of MSMEs
Pai Raiker adds that MSMEs have to utilize the loans for the purpose it is given for. “MSMEs can get back on their feet pretty fast given that they have less baggage with them. Things can be done with limited resources and the output will be far greater than big industries.”
He also points out that the current slogan is ‘Vocal for Local’ which people should whole heartedly support.
However, banks in Goa have managed to identify 0613 local units as eligible of which loans were disbursed to 33 per cent of eligible borrowers. Moreover only a handful of banks in the State are offering the scheme with SBI, HDFC Bank, Syndicate Bank, Bank of Baroda and South-India bank being the top lenders.
Atul Naik, Past President of Goa State Industries Association and Founder CEO of Precitech Components weighs in on the loan under the GECL scheme. “The GECL scheme is extremely welcome and is a timely help to the MSME sector. With the COVID-19 pandemic resulting in total lock down across the country including Goa, industry particularly MSMEs were stressed in all respects with a huge majority facing a mountain of problems including loss of market and working capital shortages, particularly stoppage of payments by customers and mounting operational costs even during lock down.” He further mentions that the GECL will help mitigate the financial crunch of the MSMEs to some extent with immediate infusion of the much needed funds. “It is expected that the loan under GECL scheme, at a much reduced rate of interest, usually not available to the MSME sector, will help bring down financial costs for this sector besides providing much needed support and funds to meet expenses during lock down and restart operations post lock down”, he adds.
“It is expected that the loan under GECL scheme, at a much reduced rate of interest, usually not available to the MSME sector, will help bring down financial costs for this sector and provide much needed support” ATUL NAIK, Founder-CEO, Precitech Components
Satish Shinde, co-founder, Astra Metal Systems Ltd, says that “The loan is a big help to the industry especially to those who really require the finances. Much as everyone has taken the loan because the money is available, one shouldn’t forget that it comes along with an interest, much as it is comparatively lower to what banks normally charge.” According to him, the facility has really helped the industry which is slowly getting back on its feet post the lockdown. Shinde further adds that it is collateral free which makes it a debt-free loan from a security perspective.
Shinde also adds that there are two ways that this loan can be utilized by the MSMEs making use of this facility. “For companies that have cash flow issues and require the money immediately in order to pay salaries and other obligations, they can partly utilize it towards that shortfall on a cash flow basis. But primarily people should use it intelligently, especially where the debts or costs are higher and based on that the amount should be put to use. Secondly, people should not simply avail of the loan because it is available. There are many companies that do not require funding and this loan would only be adding the burden to existing debts. If one can get rid of their existing debts by paying off the principle which has been deferred by three months, it makes sense for a business house to make use of this loan.”
“The loan is a big help to the industry especially to those who really require the finances” SATISH SHINDE, Co-founder, Astra Metal Systems Ltd
Jayesh Raikar, Director, Goldy Finepacks Pvt Ltd, shares his opinion on the loan “We have already availed of this loan facility. It is definitely beneficial for the MSMEs. He also adds that MSMEs with a higher rating will secure a loan with better rate of interest. This is an emergency situation wherein the government is trying to help us out. Our company was able to avail this loan within a week. There was not much documentation required which worked to our advantage,” Jayesh opines that the interest rate could have been better as the loans that they have availed of in the past, from the same institutions were given at a much lower rate of interest.
He adds that this loan is an emergency loan and the reason it is given is to increase one’s credit line. “It is purely for one’s liquidity and the crunch which was faced due to the COVID situation. In our case, there was an expansion project which we were able to continue with thanks to this loan. If there are higher interest loans which MSMEs have availed of, it can be eased with this loan itself.
“The scheme is definitely beneficial for the MSMEs – those with a higher rating will secure a loan with better rate of interest” JAYESH RAIKAR, Director, Goldy Finepacks Pvt Ltd
The month-old GECL scheme is reportedly gaining traction across India. About Rs 33,000 crore worth of loans have been disbursed under the scheme as of now. Loans under GECL are collateral free and the repayment starts after a year.
The scheme is the biggest component of the Rs 20 lakh crore ‘Atmanirbhar’ package announced by the Finance Minister, in order to help industries tide over the COVID crisis.
