RBI asks banks to assign ‘zero’ risk for emergency loans to MSMEs

The Reserve Bank of India said on Sunday that lending institutions should assign a zero percent risk weight to credit facilities granted under the emergency credit lines guarantee program for MSME borrowers announced by the government at the following the COVID-19 pandemic.

In May, the government introduced the Emergency Lines of Credit Guarantee Program (ECLGS) to provide 100% guarantee coverage for additional working capital term loans (in the case of banks and financial institutions). ) and additional term loans (in the case of NBFCs) up to 20% of their entire outstanding credit up to Rs 25 crore as of February 29, 2020.

The credit facility is guaranteed by the National Credit Guarantee Trustee Company (NCGTC). “As the credit facilities provided under the NCGTC guaranteed program are backed by an unconditional and irrevocable guarantee provided by the Indian government, there has been coverage of the guarantee,” the RBI said in a notification.

Credit institutions include banks, qualifying NBFCs and HFCs, and all Indian financial institutions (SIDBI, NHB, NABARD, EXIM Bank).

In a separate statement, the RBI said the central government had reappointed Natarajan Chandrasekaran as a part-time unofficial director at the Central Board of the Reserve Bank of India, for a further two-year term beyond March 3, 2020, or until further notice.


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