Govt expands scope of emergency credit plan
- The government has decided to extend the validity of the scheme till September 30.
he government on Sunday expanded the scope of the ₹3 lakh crore easy credit scheme meant for micro, small and medium enterprises (MSMEs) to cover loans for setting up oxygen generation plants in hospitals, and extended its tenure by another three months up to September 30.
According to the modified version of the scheme—Emergency Credit Line Guarantee Scheme (ECLGS 4.0)—100% guarantee cover will be available to loans up to ₹2 crore to hospitals, nursing homes, clinics and medical colleges for setting up on-site oxygen generation plants with an interest rate cap at 7.5%.
“The ECLGS 4.0 will further facilitate flow of institutional credit at reasonable terms to MSMEs,” a finance ministry spokesperson said.
The ₹3 lakh crore ECLGS is one of the key components of the ₹20 lakh crore economic stimulus package launched in mid-May last year that offered additional working capital finance in the form of an easy term loan to small firms.
The scheme also included the ailing civil aviation sector and further liberalised credit terms for existing beneficiaries.
Finance minister Nirmala Sitharaman’s office said in a tweet that the civil aviation sector would also be eligible to avail the easy credit under the scheme, and the validity of ECLGS was extended to September 30 or till guarantees for an amount of ₹3 lakh crore are issued. Credit disbursements under the scheme are, however, permitted up to December 31, 2021.
Earlier on March 31, the government had extended the scheme till June 30, but the industry wanted it to be extended till March 31, 2022, with an additional corpus of ₹3 lakh crore as the scheme was left with limited money.
According to the banking industry, ECLGS has already exhausted ₹2.54 lakh crore from the existing corpus of ₹3 lakh crore, and only about ₹46,000 crore is now available under the scheme. The official quoted above said: “The government may enhance the corpus depending on its demand.”
The modified scheme—ECLGS 4.0—has provided one-year additional tenure to borrowers who availed its credit facility last year under ECLGS 1.0. It has also relaxed various other conditions.
“The modifications in ECLGS, would enhance the utility and impact of ECLGS by providing additional support to MSMEs, safeguarding livelihoods and helping in seamless resumption of business activity,” the finance ministry said in a statement.
“The move aims at providing stimulus to the MSME sector, a worst sufferer of the second wave of Covid-19 pandemic. More relief for MSMEs are expected after extensive consultations with stakeholders,” one official, aware of the development, said on condition of anonymity.
Hindustan Times on May 21 wrote that the government was considering various support measures for MSMEs, including expanding the scope and tenure of ECLGS.