As a part of its push to bolster the economy amid the second Covid wave, the Government Sunday expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) to provide more relief to small businesses, bring the aviation sector under its ambit, and provide a concessional credit facility of up to Rs 2 crore in loans for health facilities to set up oxygen generation plants.
The overall size of ECLGS, however, has been kept at Rs 3 lakh crore, out of which about Rs 45,000 crore is left to be sanctioned. Those who have already availed loans under the scheme can get additional assistance of up to 10 per cent of outstanding dues as of February 29, 2020.
Simultaneously, public sector banks have announced that they are joining hands to offer standardised loans to healthcare facilities and individuals under the Covid loan book proposed by the RBI and the ECLGS.
Under this initiative, borrowers will be able to avail a tenure of five years in the revised ECLGS scheme — as against four years earlier — with repayment of interest only for the first 24 months, and of principal and interest in the next 36.
The Union Finance Ministry has also removed the current ceiling of Rs 500 crore of outstanding loans for eligibility under ECLGS, subject to maximum additional assistance to each borrower being limited to 40 per cent or Rs 200 crore, whichever is lower.
Since there is a loan cap of Rs 200 crore per company, the new scheme should be able to accommodate a large number of stressed entities, bankers said.
Under the ECLGS scheme to help companies tide over the liquidity crunch resulting from the Covid curbs, banks provide additional loans to existing borrowers without asking for extra collateral. To encourage banks, these loans are fully guaranteed by the Government against credit losses.
The scope of the scheme had been expanded thrice before. The scheme will be valid till September 2021 or till the guarantee amount of Rs 3 lakh crore is exhausted, while disbursements are permitted till December 2021.
Welcoming the latest move, FICCI president Uday Shankar raised the need to increase the limit of Rs 3 lakh crore. “The new scheme ECLGS 4.0 provides financial support to the critical healthcare sector, and we hope that the banks will go all out in disbursing the loans in a quick and timely manner. It would have further helped if a higher allocation would have also been made under this scheme. FICCI had requested that the quantum be doubled to Rs 6 lakh crore,” he said.
“These initiatives taken by all the PSU banks by coming together…is a significant step in the right direction to mitigate the financial impact due to Covid resurgence on all affected segments of borrowers,” SBI chairman Dinesh Khara said.
“Stressed sectors are already well known, like civil aviation and tourism…(the) civil aviation sector definitely needs a lot of support at this point of time,” Indian Banks Association (IBA) chairman Rajkiran Rai said.
Addressing a press conference Sunday, Khara and Rai said PSU banks will offer unsecured personal loans to individuals for Covid treatment at a concessional rate of interest — for SBI, the rate will be 8.5 per cent. These loans will start at a minimum of Rs 25,000 and can be repaid over five years.
Similarly, public sector banks will offer loans upto Rs 100 crore at concessional rates for hospitals, nursing homes, clinics, diagnostic centres and pathology labs to set up or expand healthcare facilities, Rai said.
These banks have also formulated a templated approach for loans restructuring for individuals, small businesses and MSMEs upto to Rs 25 crore. “The idea behind this is that there should not be any hardship in terms of any implementation,” said Khara.
On May 5, the RBI had announced a new restructuring scheme for individuals, small businesses and MSMEs to restructure their loans in light of the second wave. Entities that had not restructured their loans earlier, with borrowings classified as standard as on March 31, 2021, are eligible under the scheme. “Many lending institutions have got board approval and have started sending messages to eligible customers,” Khara said.
“Under ECLGS, there is still a window for Rs 45,000 crore. The schemes announced today will exhaust the remaining window,” said IBA Chief Executive Officer Sunil Mehta.
Public sector banks have designed three products to provide fresh lending support to vaccine manufacturers, hospitals and dispensaries, pathology labs, manufacturers and suppliers of oxygen, ventilators, importers of vaccines and Covid related drugs logistics firms and patients for treatment.
“Under healthcare business loans for setting up oxygen plants under ECLGS, loans up to Rs 2 crore at an interest rate of 7.5 per cent for hospitals and nursing homes is backed by 100 per cent guarantee cover under ECLGS 4.0,” Khara said.
Khara said banks will offer business loans for healthcare facilities up to Rs 100 crore to set up or expand healthcare infrastructure. They will also offer unsecured personal loans — from Rs 25,000 to Rs 5 lakh — for salaried, non-salaried and pensioners for Covid treatment, most of them at concessional rates of interest.
So far, the RBI’s restructuring plan has been availed by 60,000 customers as against 8 lakh plus eligible, the SBI chairman said. The plan covers three categories: Loans up to Rs 10 lakh for which there will be a standardised restructuring offer for certain small businesses and MSMEs; above Rs 10 lakh and up to Rs 10 crore; and, above Rs 10 crore.