Loan Guarantee Scheme for Covid Affected Sectors – LGSCAS

What is Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS)

The “Loan Guarantee Scheme for Covid Affected Sectors” (LGSCAS) is a program that offers a guarantee from the National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs) for funding or non-funding facilities up to Rs. 100 crores provided by Scheduled Commercial Banks (SCBs) to eligible healthcare projects. 

All commercial banks are eligible as MLIs. These projects can include creating or modernizing hospitals, clinics, medical colleges, pathology labs, diagnostic centers, and other public healthcare facilities, manufacturing vaccines, oxygen, ventilators, and different priority medical devices. The projects should be located in non-Metro cities.

Purpose of the Loan Guarantee Scheme for Covid Affected Sectors:

The Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS) is to offer guaranteed coverage for funding provided by Scheduled Commercial Banks to eligible projects in the healthcare field. It can include creating or modernizing hospitals, clinics, medical colleges, pathology labs, diagnostic centers, and other public healthcare facilities. 

The program will also support manufacturing vaccines, oxygen, ventilators, and priority medical devices. The program will provide guaranteed coverage for existing (brownfield) and new (greenfield) projects with a maximum loan amount of Rs.100 crore per project. The guarantee coverage will be 50% (75% for projects in aspirational districts) for brownfield projects and 75% for greenfield projects).

The program will become effective when these guidelines are issued by the National Credit Guarantee Trustee Company (NCGTC) and will cover all loans approved on or after May 7, 2021.

Duration of LGSCAS Scheme:

The duration of the program will be for loans approved between May 7, 2021, and March 31, 2023, or until guarantees for a total of Rs. 50,000 crores have been issued under the program, whichever occurs first. The first loan disbursement should be made within three months of its approval. 

However, loans approved before the revised guidelines were issued will be given an additional three months from the date the guidelines were given to make the first disbursement.

Eligibility Criteria to Avail of The Benefit of LGSCAS Scheme:

For the total loan requirement up to Rs. 100 crores (including fund-based and non-fund-based facility)

1. The project should be located in a non-metropolitan area.
2. The loan provided from the COVID Loan Book of SCBs
3. Projects related to the healthcare sector include creating or modernizing hospitals, clinics, medical colleges, pathology labs, diagnostic centers, and other public healthcare facilities and manufacturing vaccines, oxygen, ventilators, and different priority medical devices.
4. Loans provided to individuals will not be covered under the program.

Loan, Interest Rate, and Tenure of the Scheme:

1. This covid loan scheme for msme is open for new units (Greenfield projects) and existing units (Brownfield projects) in the specified sectors.
2. Funding provided under LGSCAS will be covered by a credit guarantee from NCGTC, with 75% coverage for Greenfield projects and 50% for Brownfield projects. Projects in aspirational districts will qualify for 75% coverage.
3. Borrowers should approach an SCB for financial support, which will assess the project and sanction assistance from its Covid Loan Book. They will then apply to NCGTC on an IT platform to receive the guarantee.
4. The maximum loan per project is Rs. 100 crores, and MLIs should open a separate account for the credit facility extended under the scheme.
5. The loan interest rate covered under LGSCAS will be as per RBI guidelines and capped at 7.95% p.a. The scheme may be combined with other applicable interest subvention schemes and the PPP-VGF Scheme.
6. A separate loan account should be opened for the borrower, distinct from existing accounts, for coverage under the scheme. In due course, RBI will decide the risk weight for loans provided under LGSCAS.
7. NCGTC will not charge any guarantee fee from MLIs for the credit facilities provided under the scheme.
8. The extent of guarantee coverage is 75% for Greenfield projects in any area and Brownfield projects in aspirational districts, and 50% for Brownfield projects in areas other than aspirational districts. Projects in Metro cities will not be eligible for coverage under the scheme.

Loan Default & Invocation of Guarantee:

1. MLIs are responsible for informing NCGTC of the date when an account is classified as NPA within 90 days of that classification.
2. When applying to an interim claim, MLIs must provide specific information about the account, such as the date of NPA, the amount of default, and the status of legal action.
3. Simply recalling a notice will not be considered an initiation of legal action. Legal action is regarded as initiated when an application is filed in Lok Adalat/Civil Court/Revenue State Authority/DRT, or after the action is taken according to a notice issued under Section 13(4) of SARFAESI Act, 2002, or after an application is admitted under NCLT or any other action as decided by NCGTC from time to time.
4. NCGTC will pay 75% of the guaranteed amount within 30 days of receiving an eligible interim claim from the lending institution, provided the claim is otherwise in order and complete in all respects. 

The remaining 25% of the guaranteed amount will be paid upon conclusion of recovery proceedings or until the decree becomes time-barred, whichever occurs first. Any amount recovered above the total dues, including legal costs, must be remitted to NCGTC by the MLI

Procedure for Settlement of Claim

1. The process of settling a claim is done in three steps: NPA marking, Interim Claim, and Final Claim.
2. NPA marking: MLIs must mark an account as NPA within 90 days of being classified. They must use the NPA marking module available on the portal under the Claim and Settlement section.
3. Interim Claim: MLIs should provide details of the account, including the date of NPA, the amount in default, and the status of legal action, in the claim lodgment page available on the portal. 
4. After the claim is submitted, an email will be sent to the MLI confirming the claim has been lodged, and NCGTC will take action to approve the claim request and pay 75% of the amount in default within 30 days of the claim date. It will be treated as an Interim Claim. 
5. MLIs can submit multiple interim claims if the default date for facilities under non-fund-based assistance differs. 
6. MLIs will also have to furnish details of the recoveries made in the account. After adjusting these recoveries towards the default amount covered under guarantee and legal costs incurred, remit the balance amount to NCGTC within 30 days. 
7. If they fail to do, they will be required to pay the recovered amount and interest at 2% over and above the prevailing repo rate from recovery to payment.
8. Final Claim: Once the recovery proceedings are completed, or the decree becomes time-barred, whichever happens first, MLIs should submit their claim for the balance 25% of the amount in default, net of recoveries if not already remitted as above. The process for settling this Final claim will be the same as for Interim claims.

Conclusion

In conclusion, the Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS) is an important program to provide funding and support to healthcare projects affected by the COVID-19 pandemic. This covid loan scheme for business provides a guarantee by the National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs) for fund-based or non-fund based facility upto Rs.100 crore extended by Scheduled Commercial Banks (SCBs) to eligible projects in the healthcare sector for setting up of or for modernizing/expansion of various healthcare facilities. 

This scheme will significantly help the healthcare sector overcome the financial crisis caused by the pandemic. Additionally, the scheme provides coverage for legal action in case of default and will help recover funds. Overall, LGSCAS is a well-designed scheme that will provide much-needed support to the healthcare sector during these difficult times.
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