ECLGS is a ₹3 trillion government-backed loan scheme, announced by finance minister Nirmala Sitharaman as part of AtmaNirbhar Bharat package 1.0 in May, for businesses including micro small and medium enterprises
NEW DELHI: Finance minister Nirmala Sitharaman on Thursday announced an emergency credit line guarantee scheme 2.0 (ECGLS) for 26 stressed sectors, including power, construction, real estate, iron and steel manufacturing.
The credit guarantee scheme will provide support to entities in the healthcare sector and 26 stressed sectors identified by the Reserve Bank of India (RBI) appointed KV Kamath committee. Entities will get additional credit of up to 20% of outstanding credit, while the repayment can be done in five years’ time, which will include a one-year moratorium and repayment period of four years. Companies having credit outstanding of more than ₹50 crore and up to ₹500 crore as on 29 February 2020 can get access to this credit.
Companies with dues past 30 days as on 29 February 2020 can avail credit from banks.
“ECLGS 2.0 will provide much needed relief to stressed sectors by helping entities sustain employment and meet liabilities. Will also benefit MSME sector, which provides goods and services to eligible entities," Sitharaman said, while announcing measures to boost economic growth. The scheme will be available till 31 March 2021.
The first round of ₹3 trillion government-backed emergency credit line guarantee scheme was announced by Sitharaman as a part of the Atmanirbhar Bharat Package 1.0 in May. The minister on Thursday said that ECLGS for small businesses, business enterprises, individual loans for business purpose, MUDRA borrowers, will be extended till 31 March 2021. The rate of interest will continued to be capped at 9.25%.
So far, out of ₹3 trillion, lenders have sanctioned ₹2.05 trillion in loans, of which ₹1.52 trillion has been disbursed. ECLGS 2.0 will continue to remain within the ₹3 trillion limit.
CII president Uday Kotak welcomed the step taken by the government. “This will help the sectors, which employ a large number of people, tide over the cash crunch and working capital issues, in the wake of low demand. Designed on the lines of a similar scheme existing for the MSMEs, ECLGS 2.0 will provide 100% guaranteed collateral free additional credit, thus helping to provide interim liquidity support to these sectors, till demand recovers," Kotak said.
However, Sujan Hajra, chief economist and executive director, Anand Rathi Shares & Stock Brokers said that the announcement can potentially be negative for the financials if the government and the RBI resorts to moral suasion or more direct measures to nudge bank towards accelerated lending to the pandemic impacted sectors.