The scheme will provide guaranteed credit support for 26 stressed sectors identified by the Kamath Committee
Under the scheme, 100% guarantee for loan would be provided by NCGTC
The finance ministry on Thursday formally informed banks and non-banking financial companies (NBFC) about expanded Emergency Credit Line Guarantee Scheme (ECLGS) 2.0. The guaranteed loan scheme scheme was earlier announced by finance minister Nirmala Sitharaman as part of the third Atmanirbhar Bharat fiscal stimulus.
The scheme will provide guaranteed credit support for 26 stressed sectors identified by the Kamath Committee. Tenor of this additional credit under ‘ECLGS 2.0’ will be five years, including one year moratorium. Companies with dues of ₹50-500 crore as on 29 February are eligible. The aim was to mitigate the distress of different sectors caused by coronavirus pandemic-induced lockdown. The original ECLGS had one year of moratorium and four years of repayment, while the new scheme will have one-year moratorium and years of repayment.
The overall size of credit line will remain unchanged at ₹3 lakh crore. Borrowers eligible under the scheme will get additional funding up to 20% of their total outstanding credit as a collateral free credit. Under the scheme, 100% guarantee for loan would be provided by the National Credit Guarantee Trustee Company Limited.
It will be extended in the form of additional working capital term loan facility and non-fund based facility in case of scheduled commercial banks and financial institutions, and additional term loan facility in case of NBFCs. The guaranteed loan scheme will also be available for MSMEs/business enterprises, individual borrowers in case of the original loan having been for own business and Pradhan Mantri Mudra Yojana (PMMY) borrowers.
In cases where no annual turnover ceiling is prescribed, the government has extended ECLGS 1.0 to entities with total credit outstanding up to ₹50 crore as on February 29, but was previously ineligible owing to their annual turnover exceeding Rs.250 crore, finance ministry said.
The scheme will be applicable to all loans sanctioned under ECLGS during the period from the date of issue of these guidelines by NCGTC to 31.03.2021 or till guarantees for an amount of ₹3,00,000 crore is sanctioned under the ECLGS (taking into account both ECLGS 1.0 and 2.0), whichever is earlier, the ministry said.
"The modified scheme while providing an incentive to Member Lending Institutions (MLIs) to enable availability of additional funding facility to the eligible borrowers, both MSMEs/business enterprises and identified sectors that supports MSMEs, will go a long way in contributing to economic revival, protecting jobs, and create conducive environment for employment generation," the finance ministry mentioned.
Commenting how the scheme will be beneficial for stressed sectors, Siddhartha Sanyal, chief economist and head- research, Bandhan Bank said, "Embattled sectors like real estate, hospitality and aviation can draw hope from the ECLGS 2.0 announced for 26 stressed sectors identified by the government."
"Enhancement of the outstanding credit criteria to ₹500 crore and no upper ceiling specifying an eligible company’s annual turnover will help a wider set of business enterprises, including MSMEs, avail guaranteed credit that can help them tide over this difficult period and continue with their business operations," he further added.