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Home / News / India /  ECLGS scheme expansion to act as lifeline for airlines, tourism sectors: Crisil

NEW DELHI : The expansion of the Emergency Credit Line Guarantee Scheme (ECLGS) recently announced by the government will act as a lifeline to highly leveraged companies in sectors such as civil aviation, hotels and tour operators, which have been severely impacted by the intense second wave of the covid-19 pandemic, Crisil Rating said in a report on Wednesday.

"More sectors have been brought under the scheme’s ambit, some eligibility criteria have been relaxed, and micro, small and medium enterprises (MSMEs) have been allowed to avail of loans for longer tenures," the report said.

"The scheme has sanctioned about 2.54 lakh crore ( 2.5 trillion) of loans under the previous three versions as of mid-May," it added.

The Union government has decided to extend the validity of the scheme from 13 May till 30 September 2021 or till guarantees for an amount of 3 trillion are issued. Disbursement under the scheme will be permitted up to 31 December 2021.

According to a statement issued by the ministry of finance, borrowers who are eligible for restructuring as per RBI guidelines of 5 May 2021, and had availed loans under ECLGS 1.0 of overall tenure of four years comprising repayment of interest only during the first 12 months, with repayment of principal and interest in 36 months thereafter, will now be able to avail a tenure of five years for their ECLGS loan—that is, repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter.

"All these (sectors) have been hit hard by the second wave. In the current quarter, these sectors are expected to see a demand contraction of over 30% sequentially," Crisil said in the report.

"Moreover, except for airport operators, many companies in the other stipulated sectors of the scheme have high leverage, which constrain their ability to withstand unexpected demand contraction," it added.

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