Government Allows Defaulters To Borrow More Under Emergency Credit Line Guarantee Scheme

The central government has extended the scope of its Emergency  Credit Line Guarantee Scheme to those with repayment dues of up to more than 60 days. This facility would be available to 26 stressed sectors identified by former ICICI Bank Chief K.V. Kamath and sectors which have been included are those including healthcare,
aviation, corporate retail outlets, power, construction, cement and textiles. Stressed borrowers to the tune of Rs. 50 crore to Rs. 500 crore can avail the benefits of this facility. spoke to veteran trade union leaders and experienced hands from Public Sector Banks to seek their opinion on this move of the government.

Sanjay Das, General Secretary of the West Bengal Chapter of All India Bank Officers’ Confederation (AIBOC) told “with the wake of second wave of Covid 19 the decision of extending Emergency Line of credit to the sectors which have  been hard hit  by it is welcome but as the epidemic will not going to be an end in near future these accounts are going to be potential NPA with the prevailing Asset classification norms. It is the need of the hour for the account holders those who have genuine problem of repayment.But the delinquent defaulters should not be given patronages. Whenever there is any emergency call of the nation PSU banks came forward.

He added that 10 years back when there was another call of the nation for long term loan in infrastructure lending PSU banks came forward and Private players were sitting idle on money. Ultimately these long term loans were not repaid on time and PSU banks were blamed for piling of NPA. Therefore, this decision should go side by side changing the Prudential norms else, it will again put the PSU banks into another bucket of allegation.

Thomas Franco, former General Secretary All India Bank Officers’ Confederation (AIBOC) said ” Providing credit to borrowers who have defaulted for 60 days is a welcome step as there is no recovery in most of the sectors after Covid 19. With the second spell affecting more people there will be more stress. The Government
has to meet atleast the interest portion of all loans especially MSME loans to help economy to revive. This has been done in most of the countries. This is a situation which calls for write off of small loans including farm loans. Otherwise the economy will suffer for a longer period. However banks should be allowed to do due diligence to ensure that wilful defaulters do not get this benefit.

Reacting on the government decision, C.Srikumar Convener of AITUC PSU Unions stated “Such concessions are not given by the Govt to small traders and farmers who are very much affected due to Covid 19.However the present decision to allow defaulters to avail additional loan is meant for Small and Medium Units with government guarantee, therefore the lending banks may not be affected . But in principle favouring defaulters is a wrong decision.”

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