As business activities resumed on Monday after a nationwide lockdown, the Finance Ministry has swung into action to ensure credit flow to companies and prescribed a specific time frame for banks within which a loan needs to be disbursed.
In a communication to State-run banks, the government said the move is aimed at ensuring credit flow for economic activities and the guidelines come into effect from Monday when the business activities resume.
“In the context of resumption of business activities w.e.f. 20.4.2020, timely origination, sanction and disbursement of fund based and non-fund based credit is critical for revival of economic activity,” the communication from the Finance Ministry said.
The move comes as banks have turned risk averse to extend loans amid an uncertain economic outlook caused by the coronavirus (COVID-19) pandemic.
As per the indicative time frames, from processing to disbursement of COVID-19 emergency credit lines, the Ministry said banks have to complete the disbursement within 6 to 9 working days for working capital demand loans for existing micro, medium and small enterprises; corporate and agriculture borrowers as well as financial assistance to self help group borrowers.
Working capital reassessment up to ₹5 crore for existing borrowers have to be processed within 6 to 9 days, while for such facilities of ₹5 crore and above need to be processed within 12 to 15 working days.
“Banks are advised to draw a detailed activity wise time frame to achieve the turnaround time sought,” the ministry said in the communication.
The ministry has also asked banks to ensure wide publicity of the details of the COVID-19 related credit schemes, checklist of documents required for each scheme, time frames for communicating decisions regarding sanctions and these information needs to be tweeted by banks and tag it to the twitter handle of department of financial services.
“Banks should ensure that relevant internal communication of the above mentioned schemes along with clear responsibilities and defined timeframes are conveyed to the field level functionaries and monitored on an on going basis,” the Ministry said.
News Source: The Hindu