21.9 C
New York
Tuesday, June 25, 2024

Benefits of GECL Scheme for Expanding Small Businesses in India

The Reserve Bank of India and the Government of India has taken various measures for combating the financial challenges faced by business individuals during the covid-19 crisis. As part of the relief measure, the financial department introduced the Guarantee Emergency Credit Line scheme or the GECL scheme to provide 100% guarantee coverage to eligible borrowers.

Under this scheme, the borrowers get additional working capital term loans to help them manage their business efficiently. All medium and small businesses can take up this loan amount for specific business purposes. However, the Government of India happens to identify 26 sectors that will benefit from this service. The purpose of the GECL scheme happens to mitigate the economic distress that every medium and small business entrepreneur faces.

However, one can avail of the loan amount under this scheme in two ways. One is a fund-based facility, whereas the other is a non-fund-based facility. In the case of the fund-based facilities, you can get it as a working capital term loan. But in the case of the non-fund-based facilities, you can get it as a forward contract facility for a bank guarantee.

However, various partnerships, proprietorship, trusts, registered companies, limited liability partnerships and many more can apply for financial assistance under this scheme. It can act as the MSME loan for new business.

The benefit of no penalty interest

You can take the loan without paying any processing charges. Moreover, if you want to pay the principal amount and interest in advance, you need not pay any fee payment charges. However with no penalty interest for the proposed facility makes it one of the best for any small and medium business organization. However, the penal interest of 5% would be charged for any overdue interest and installments for the proposed working capital term loan.

The limit of advance under this scheme happens to be 20% of the entire outstanding credit amount under the fund based exposure. If anyone wishes to get the full benefits and eligibility of theGECL scheme with any financial banking institutions, they need to offer a NOC certificate from other MLI.

Make yourself atma nirbhar

With the various levels of GECL, one can expect the individual to be financially dependent while operating their medium or small-sized business. At the first level, the government offers financial aid to this business organization to help them restart the business and procure raw materials. It can also help them meet the business’s operational costs that got affected due to the covid-19 situation. However, the interest rate of the loan amount at this particular stage becomes 7.40 % for every medium and small business enterprise.

But at the second level, the rate of interest becomes 7.65% for medium and small enterprises. Whereas for every non medium and small enterprise, it happens to be 7.95%. And the third level remains the same as that of the second one. But at the 4th level, the interest rate becomes 7.5 0% per annum for every medium and small enterprise and non-medium and small enterprises.

However, there are various scopes and extensions of this particular scheme. By considering the eligibility criteria and duration, the Government of India somehow extended and remodeled these schemes according to the benefits of the existing customer.

Moreover, if any business organization faces defaults, it becomes the government’s duty to take charge of the case. With such features to be considered, one can say that the GECL scheme happens to be one of the best for medium and small enterprises.

It also helps them to provide various benefits that they can utilize to expand their small and medium business organizations. However, if any business organization wants to get the MSME loan for a new business, they can get the help of various financial assistance under the GECL scheme.

Related Articles

Stay Connected


Latest Articles