To tackle the damage caused due the Coronavirus pandemic that has grounded businesses across the globe, Indian government has asked its state-owned banks to extend emergency credit lines to eligible corporate borrowers, reports stated on Monday.
A Reuters report quoted its source on the condition of another as saying, “Banks have been asked to make available an additional 10 per cent in funds over and above sanctioned working capital loans, but not exceeding Rs 200 crore per loan account as part of the emergency measures, a senior government official.”
As of now, country’s largest lender, State Bank of India has already launched its emergency credit line to meet any liquidity mismatch for its borrowers affected by COVID-19 pandemic.
In a three-page circular issued on Friday, the state-run bank directed its chief general managers that an additional liquidity facility Covid-19 Emergency Credit Line (CECL), will provide funds up to Rs 200 crore and will be available till June 30, 2020. None of the sources wanted to be named as the plan is not yet public.
The coronavirus pandemic has sparked concerns about the health of the small and medium-sized enterprises that have already been hammered by a slowing economy.
In the last three months in 2019, India’s economy expanded at its slowest pace in more than six years and experts have predicted a further slip caused by the global COVID-19 outbreak.
Banks have also asked the banking regulator to ease bad loan classification rules and also to extend loan repayments by six months across categories spanning industry, agriculture and retail customers.
Shadow banks have also made such similar requests the government and the Reserve Bank of India (RBI), these banks have already begun to see an impact on repayment caused by the COVID-19 pandemic, reports stated.
The RBI has also allowed banks to classify loans to NBFCs for key areas such as agriculture, housing and small and medium businesses – up to certain limits – as priority sector lending for the next financial year as well, in a bid to keep credit flowing to the parts of the economy where most Indians work.
The measure, introduced in August, was originally planned to last until March this year.
As of today, India has more than 400 confirmed cases of coronavirus. Maharashtra, the financial capital of India, has recorded the highest number of cases in the country and authorities have banned gatherings of more than five people in the state.
(With input from agencies)