To provide relief to stressed companies, the Finance Ministry expanded the scope of a government-guaranteed credit facility to healthcare and stressed sector companies that have loan dues for up to 60 days (or SMA-1 accounts),as against 30 days earlier (SMA-0).
- This has been expected to provide partial relief to stressed firms facing fresh uncertainty and business risks due to fresh lockdowns and restrictions being imposed by states.
- SMA-1 borrowers in the healthcare sector and 26 other high stress sectorsare now eligible under ECLGS 2.0.
- Companies from hospitality, travel & tourism, and leisure & sportingsectors are expected to benefit from the relaxation in the scheme.
- Accounts that are classified as non-performing assets or where overdueshave crossed 60 days (SMA-II) are not eligible.
- Companies that had loan dues up to 30 days (Special Mention Accounts or SMA-0) as on February 29, 2020, were being provided additional credit of 20 per cent outstanding under the scheme, which will now be given to SMA-1 accounts as well.
- The government has recently extended the ECLGS till June 2021, as against March 31, 2021 earlier.
About the ECLGS scheme:
- The Finance Ministry unveiled a Rs. 20 Lakh Crore comprehensive package, known as the Emergency Credit Line Guarantee Scheme (ECLGS), in view of the economic distress caused by the COVID-19 pandemic.
- This package is in aid of MSME sector, addressing working capital needs, operational liabilities and restart business impacted due the COVID-19 crisis.
- Borrowers with up to Rs. 25 Crore outstanding as on Feb 29, 2020 and up to Rs. 100 Crore annual turnover for FY 2020 are eligible for this scheme.
- Business Enterprises, MSMEs constituted as Proprietorship, Partnership, registered company, trusts and Limited Liability Partnerships (LLPs) shall also be eligible.
- Borrower accounts which had NPA or SMA-2 status as on Feb 29, 2020 shall not be eligible under the scheme.
- 20% of the total outstanding credit of borrowers can be sanctioned as a loan under the Guaranteed Emergency Credit Line (GECL), for those who having a loan as on Feb 29, 2020.
Special Mention Accounts:
- SMAs are those assets/accounts that shows symptoms of bad asset qualityin the first 90 days itself or before it being identified as NPA.
- The classification of Special Mention Accounts (SMA) was introduced by the RBI in 2014, to identify those accounts that has the potential to become an NPA/Stressed Asset.
- Logic of such a classification is because some accounts may turn NPA soon.
- An early identification will help to tackle the problem better.
- There are four types of Special Mention Accounts – SMA-NF, SMA 0, SMA1 and SMA 2.
- The Special Mention Accounts are usually categorized in terms of duration.
- For example, in the case of SMA -1, the overdue period is between 31 to 60 days.
- On the other hand, an overdue between 61 to 90 days will make an asset SMA -2.
- But some ‘Special Mention’ assets are identified on the basis of other factors that reflect sickness/irregularities in the account (SMA -NF).
- In the case of SMA -NF, non-financial indications about stress of an asset is considered.