Home / News / India /  ECLGS 2.0 can infuse over 40,000 crore liquidity: Report

MUMBAI : The extended emergency credit line guarantee scheme (ECLGS 2.0) has the potential to infuse over 40,000 crore liquidity into the targeted 26 stressed sectors, including the healthcare industry, says a report.

The new ECLGS scheme and the resultant identification of the affected sector was done after the RBI-appointed K.V. Kamath committee recommended to extend liquidity to the worst-hit sectors after being pummeled by the pandemic driven lockdown.

The possible over 40,000-crore liquidity through the ELCGS 2.0 will be sufficient to help companies, including those hit by a sharp decline in cash flows because of the pandemic, to overcome liquidity pressures," says a Crisil report.

Under the scheme, companies with outstanding loans of 50 crore to 500 crore are eligible for additional credit of up to 20% of their outstanding debt as of February 29, 2021.

Of Crisil-rated portfolio, as much as 1,414 companies from 27 sectors, including healthcare, are eligible for the scheme. These companies collectively have an outstanding debt of 2 lakh crore as of February 29.

These companies are facing an average cash flow contraction of 17% or by 11,000 crore, compared to the pre-pandemic assessment.

Borrowing under the new extended scheme can provide additional liquidity equal to 3.5 times the cash-flow contraction for the sample set. This will help them overcome temporary liquidity challenges. Also, the one-year moratorium available under the scheme will provide further room for companies to stabilise their cash flows, says the report.

The scheme will particularly benefit companies in low-resilience sectors like hotels, gems & jewellery, travel and real estate as their accruals are expected to fall sharper at 23% this fiscal.

Companies in high-resilience sectors like dairy, IT, FMCG, chemicals and pharma are seen less impacted, with only around 10% decline in their cash flow. These companies can also benefit from the scheme with additional liquidity being created of about 5 times their cash flow contraction, says the report.

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