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PSU financial institutions reveal unique credit facility for MSMEs

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Mumbai/Kolkata: Following the footsteps of State Bank of India other state-run lenders Bank of India, Union Bank of India, Uco Bank and Indian Bank too announced emergency credit lines for their existing MSME borrowers.

This is being done in consultation with the ministry of finance and there are expectations that more banks will follow through with similar decisions. Union Bank of India said it is providing additional credit facilities for its customers to tide over liquidity issues under which 10 percent of the working capital limit will be provided which will be payable in 12 instalments at lower rates of interest.

Bank of India also said an emergency credit line will be made available very soon to provide some relief to the borrowers impacted by COVIDー19. “We are trying to address the cash flow issues faced of borrowers by offering them additional loan limit.

This is strictly not for repaying the existing loan," Uco Bank chief executive AK Goel said.

"This is a special facility at the time of crisis and therefore we are offering this at the existing lending rate.

In normal times, banks charge a higher rate for additional loan limit.” Another state-run lender Indian Bank too announced a similar line of credit that will provide additional funding of up to 10% of the working capital limits with a maximum limit of Rs.100 crores.

The bank also said that large corporates and medium enterprises that are in the standard category would be eligible for this loan.

The loan tenor will be for 36 months with an initial moratorium of up to 6 months and would carry fixed interest rate of 1 year MCLR.

The bank also bought in similar products to help its self -help group borrowers. “We expect that these credit lines will meet the immediate liquidity requirements of businesses,” said Padmaja Chunduru, MD, Indian Bank.

“We have made these loans repayable over a longer period of time to give them the flexibility in operations until business is back on track again.” South-based lender Syndicate Bank said it has decided to stop calls and visits to customers for loan recovery and added that customers coming voluntarily for repayment will be serviced in the normal manner. On March 20, State Bank of India became the first bank to open an emergency credit facility for borrowers affected by the Coronavirus outbreak.

In a three-page departmental circular addressed to all its chief general managers, the state-owned lender directed that a maximum loan amount of upto Rs 200 crores or 10 percent of the existing fund based working capital limits can be availed under this emergency line.

The facility will be available till end of June specifically aimed at MSME borrowers and will be given at a flat rate of 7.25%.




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