The country’s largest banker State Bank of India has moved swiftly to introduce a fresh line of credit for companies affected by the Coronavirus pandemic in their operations. In a circular sent to its branches the bank has called this loan facility the COVID-19 Emergency Credit Line (CECL) and will be available to all eligible borrowers of the bank.
The loan product is structured as a demand loan with a payback duration of one year and carry an interest rate of 7.25%. SBI is also waiving off any loan processing fee or prepayment penalty on the amount borrowed.
In terms of the quantum of the loan, the borrower can avail up to 10% of their fund-based working capital already sanctioned by the bank and the upper limit will be Rs 200 crore. Even customers who have availed any special loans can avail this line of credit.
The sudden developments related to coronavirus and the closing down of markets etc. has led to many businesses lose revenue and many may find it difficult to pay their employees salary due to liquidity constraints. SBI’s loan product is meant to address this gap and need.
The SBI customers who will not be able to take advantage of this facility will be those whose accounts have been classified as special mention accounts 1 and 2. These are as per the RBI norms, where borrowers have failed to make loan repayments and the overdue period is between 31 and 60 days and 61 to 90 days respectively. These are called SMA 1 and SMA 2 accounts. Those whose repayment is overdue by less than a month are SMA-0 and such borrowers of SBI may still be able to get the CECL loan.
Some of the other Prudential norms etc. stipulated by RBI will also be considered before the loan is approved.