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MUMBAI : The government on Sunday extended a sovereign-backed emergency lending programme to airlines and hospitals to help them overcome the disruptions caused by the pandemic.

The loans under the Emergency Credit Line Guarantee Scheme (ECLGS), which was earlier provided to sectors such as textiles and auto components, can now be availed of by airlines and hospitals until 30 September or till guarantees for an amount of 3 trillion are issued, the finance ministry said in a statement. Disbursement under the scheme will be permitted till 31 December.

So far, about 2.4 trillion have been disbursed under the programme, Sunil Mehta, chief executive of the Indian Banks’ Association, told reporters at a briefing after the government announcement. Banks said they have sanctioned 2.5 trillion and have room for about 45,000 crore of loans for the aviation sector and medical institutions.

Business owners, especially the ones hardest hit by the pandemic, have been asking the government to extend the scheme to their sectors as localized lockdowns have adversely impacted their businesses and crimped their ability to repay loans.

On Sunday, the government also allowed small businesses to borrow an additional 10% of their credit limit to tide over the crisis. Some borrowers can also extend the tenure of their loans.

“The modifications in ECLGS would enhance the utility and impact of ECLGS by providing additional support to MSMEs, safeguarding livelihoods and helping in the seamless resumption of business activity. These changes will further facilitate the flow of institutional credit at reasonable terms," the finance ministry said in the statement.

The government also made changes to previous iterations of the emergency credit programme, including ECLGS 1 and 3 schemes.

According to the ministry statement, borrowers who are eligible for restructuring as per Reserve Bank of India guidelines of 5 May, and had availed of 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 of a tenure of five years for their ECLGS loan, i.e. repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter.

Companies in the civil aviation sector, which have been the most adversely impacted due to the resurgence in covid-19 cases, will be able to get credit from banks under the credit programme.

The government will also give full guarantee for loans up to 2 crore to hospitals, nursing homes, clinics and medical colleges for setting up on-site oxygen generation plants, and interest for such loans cannot exceed 7.5%.

Experts said that the new scheme will support the liquidity position of borrowers.

“The government will also not be burdened with additional cost because of the second wave, and this will also improve the utilization of overall ECLGS funding pool available," said Anil Gupta, vice-president (financial sector ratings) at Icra Ltd.

Public sector banks also came together on Sunday to announce plans of providing covid-specific loans to the healthcare sector and for individuals looking to borrow for medical expenses.

State Bank of India, for instance, will give unsecured personal loans for covid-19 treatment at 8.5%, ranging between 25,000 and 5 lakh.

Meanwhile, state-owned banks also said that they have formulated a template for the new set of loan recasts under rules announced by the Reserve Bank on 5 May.

“The idea is to ensure that those involved in the resolution framework should not have any hardship in terms of implementation," said State Bank of India chairman Dinesh Khara.

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