On Thursday, the Finance Ministry formally informed banks and non-bank finance companies (NBFC) about the expanded Emergency Line of Credit Guarantee Scheme (ECLGS) 2.0. The guaranteed loan scheme was previously announced by Finance Minister Nirmala Sitharaman as part of Atmanirbhar Bharat’s third fiscal stimulus.
The scheme will provide guaranteed credit support for 26 stressed sectors identified by the Kamath Committee. The term of this additional credit under ‘ECLGS 2.0’ will be five years, including a one-year moratorium. Companies with quotas of ₹50-500 crore as of February 29 are eligible. The objective was to mitigate the anguish of different sectors caused by the blockade induced by the coronavirus pandemic. The original ECLGS had a one-year moratorium and four years of repayment, while the new scheme will have a one-year moratorium and years of repayment.
The total size of the credit line will remain unchanged in ₹3 lakh crore. Under the scheme, the National Credit Guarantee Trustee Company Limited would provide a 100% guarantee for the loan. It will be expanded in the form of an additional term loan facility for working capital and a non-fund based facility in the case of commercial banks and scheduled financial institutions, and an additional term loan facility in the case of NBFC. The secured loan scheme will also be available to MSMEs / commercial companies, individual borrowers in case the original loan was for own companies, and Pradhan Mantri Mudra Yojana (PMMY) borrowers.
The scheme will be applicable to all loans sanctioned under ECLGS during the period from the date of issuance of these guidelines by NCGTC until 03.31.2021 or up to guarantees for an amount of ₹Rs 3.00 billion is sanctioned by the ECLGS (taking into account both ECLGS 1.0 and 2.0), whichever comes first, the ministry said.
“ECLGS 2.0 will provide much needed relief to stressed industries by helping entities maintain employment and meet responsibilities. [It will] They also benefit the MIPYMES sector that provides goods and services to eligible entities ”, indicated the Ministry of Finance.
“The modified scheme, while offering an incentive to member lending institutions (MLIs) to allow the availability of an additional financing service for eligible borrowers, both MSMEs / commercial enterprises and identified sectors that support MSMEs, will contribute largely to economic reactivation, protecting jobs and creating an environment conducive to job creation, “mentioned the Ministry of Finance.
Siddhartha Sanyal, chief economist and director of research at Bandhan Bank, commented on how the plan will be beneficial for stressed sectors, said: “Conflicting sectors such as real estate, hospitality and aviation can draw hope from the ECLGS 2.0 announced for 26 sectors identified by the government. “
“Improvement of pending credit criteria for ₹Rs 500 crore and no upper limit specifying the annual turnover of an eligible business will help a broader set of business enterprises, including MSMEs, take advantage of guaranteed credit that can help them get through this difficult period and continue their business operations. “he added.
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