The Finance Industry Development Council, a representative body of non-banking finance companies, has written to Finance Minister Nirmala Sitharaman seeking inclusion of all individuals who have taken loans for purchase of vehicles for commercial purposes for assistance under the Emergency Credit Line Guarantee Scheme (ECLGS).
The National Credit Guarantee Trustee Company (NCGTC), which is providing 100 per cent guarantee under ECLGS, on July 2 clarified that all eligible borrowers, including business enterprises/MSMEs, individuals in case of loans covered under MUDRA scheme who have availed debt against vehicles for commercial purposes are eligible for assistance under ECLGS.
FIDC said the assistance to eligible individual borrowers under ECLGS is just limited to loans given under MUDRA scheme.
In the letter, FIDC requested to include all loans given to individuals for purchase of vehicles (including construction equipment vehicles, taxis etc) which are registered for commercial purposes as eligible for assistance under ECLGS.
More than 75 per cent of NBFC customers take loans in their individual names as they do not have any business establishment in the name of firm or partnerships and they conduct their business in individual names, the letter said.
Every month NBFCs give loans ranging from Rs 3 lakh to Rs 25 lakh for purchase of vehicles for commercial purposes.
Most of these loans are not refinanced under MUDRA scheme either as the loan amount is over Rs 10 lakh or as the interest spread is higher than mandated to cover the operating costs and credit losses, the letter said.
However, all these loans are disbursed exclusively for purchase of vehicles used for commercial purposes and create employment in the informal sector, it said.
FIDC requested that a timely clarification on the issue will significantly help provide additional credit support to millions of MSMEs who are dependent on NBFCs for meeting their working capital needs.
The government in May had announced ECLGS, a 100 per cent credit scheme worth Rs 3 trillion to support the MSME sector, which has been adversely affected by disruptions caused by the coronavirus crisis.