Representative image: Reuters
Finance Ministry on September 29 extended the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) for six months till March 2022.
“With a view to support various businesses impacted by the second wave of COVID 19 pandemic, it has been has decided to extend the timeline of Emergency Credit Line Guarantee Scheme (ECLGS) till 31.03.2022 or till guarantees for an amount of Rs 4.5 lakh crore are issued under the scheme, whichever is earlier,” Finance Ministry said.
Further, the last date of disbursement under the scheme has also been extended June 30, 2022.
The Rs. 3 lakh crore ECLGS was introduced to mitigate the stress caused by the Covid-19 pandemic on several sectors across the country. The scheme was launched as part of the Rs. 20 lakh crore Covid-19 relief package called the Atmanirbhar Bharat Abhiyan in May 2020.
Earlier this year, the government has enhanced the limit to Rs. 4.5 lakh crore and extended the scheme’s validity by 3 months from June 30 to September 30 this year.
It aims provide 100 percent guaranteed coverage to the banks, non-banking financial institutions (NBFCs) and other lending institutions in order to enable them to extend emergency credit to business entities that have suffered due to the Covid-19 pandemic and are struggling to meet their working capital requirements.
As of September 24, 2021, Rs 2.86 lakh crore in loans has been sanctioned, the Ministry said.
Out of total guarantees issued, about 95 percent of the guarantees issued are for loans sanctioned to Micro, Small and Medium Enterprises, it said.
The government also announced some modifications in the scheme to enable support to businesses impacted by the second wave of COVID.
“Existing borrowers under ECLGS 1.0 & 2.0 would be eligible for additional credit support of upto 10 percent of total credit outstanding as on 29.02.2020 or 31.03.2021, whichever is higher,” it said.
Further, the businesses which have not availed availed credit under ECLGS 1.0 or 2.0, can avail credit support of upto 30 percent of their credit outstanding as on 31.03.2021 and sectors under ECLGS 3.0 avail credit support up to 40 percent of their credit outstanding as on 31.03.2021, to the maximum of Rs.200 crore per borrower.
The ECLGS was initially announced for the MSME sector but later with various revisions its scope was expanded to 26 stressed sectors identified by the Kamath Committee, healthcare sector, business enterprises in the hospitality, travel and tourism and aviation.
Ramamurthy, member, All India Council of Association of MSMEs (AICA) which represents 170 MSME associations across the country said that an extension of the scheme is a welcome step.
“Why close the scheme when the amount is not exhausted. The economy is still in the recovery phase so an extension would only help many industries to avail it which have not been able to,” he said.
Yogesh Pawar, Chairman Association of Inspiring Syndicate of Entrepreneurs said, “The disbursement has been slow in the scheme at the end of banking institutions and the Government has not been able to meet the targeted amount for MSMEs. This is the thought to be the primary reason for the extension in the scheme till March 2022.”
The Associations works in the space of training and uplifting of MSMEs.
Pawar also observed that scheme has been a boon for MSMEs during post Covid period, as they have been struggling with working capital requirement and the increase in raw material prices at the same time.
K E Raghunathan, Convenor, Consortium of Indian Associations said, “I would suggest the extension should be till the time the amount is finished.”
Raghunathan noted that 52 sectors have been identified that are almost wiped off with the second Covid outbreak which are predominantly run by micro and small entrepreneurs.
“These sectors include salons, gyms, cinema theatres, construction contractors, sheet metal manufacturers, paper manufacturers, street vendors, auto ancillaries, freight forwarding, exhibition and event management firms, and more,” he added.