Finance Ministry widens scope of ECLGS, banks to offer concessional loans for setting up oxygen plants

The finance ministry on Sunday expanded the scope of the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), which will now offer concessional loans to hospitals for setting up on-site oxygen generation plants.

Besides, the validity of the scheme has been extended by three months to September 30 and or till guarantees for an amount of Rs 3 lakh crore are issued, the ministry said in a statement.

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The last date of disbursement under the scheme has been extended to December 31.

"On account of the disruptions caused by the second wave of COVID-19 pandemic to businesses across various sectors of the economy, the government has further enlarged the scope of Emergency Credit Line Guarantee Scheme," it said.

Briefing the media about the scheme, Indian Banks' Association Chief Executive Officer (CEO) Sunil Mehta said lending institutions have sanctioned Rs 2.54 lakh crore so far and another Rs 45,000 crore room is available under the ECLGS.

Out of Rs 2.54 lakh crore sanctioned loan, Rs 2.40 lakh crore has already been disbursed to eligible MSMEs and businesses.

Under the ECLGS 4.0, it said, 100 per cent guarantee cover will be given to loans up to Rs 2 crore to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

The interest rate on these loans has been capped at 7.5 per cent, which means the banks can offer loans less than this ceiling.

"Borrowers who are eligible for restructuring as per the RBI guidelines of May 5, 2021, and had availed loans under ECLGS 1.0 of overall tenure of four years comprising of 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 i.E. Repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter," the ministry said.

Also, the new scheme has made a provision of additional ECLGS assistance of up to 10 per cent of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0, in tandem with restructuring as per the RBI guidelines of May 5, 2021.

The government has also removed the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0, subject to maximum additional ECLGS assistance to each borrower being limited to 40 per cent or Rs 200 crore, whichever is lower.

Loans to the civil aviation sector made eligible under ECLGS 3.0.

The ECLGS 3.0 covered business enterprises in Hospitality, Travel & Tourism, Leisure & Sporting sectors, which had as of February 29, 2020, total credit outstanding not exceeding Rs 500 crore and overdue, if any, was for 60 days or less, on that date.

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

The tenor of loans granted under ECLGS 3.0 would be 6 years, including a moratorium period of 2 years.

Budget carrier SpiceJet on Sunday said the inclusion of the aviation sector in ECLGS will help the domestic aviation industry, which has been impacted the most by the pandemic.

The inclusion of the civil aviation sector under the ECLGS is a welcome and timely move by the government that should help the sector that has been the most severely impacted by the pandemic, SpiceJet Chairman and Managing Director Ajay Singh said.

"We all are aware of the scenario which emerged post resurgence of COVID 2.0. It has actually led to a lot of disruption of economic activity.

"The most vulnerable among them, MSMEs, are in need of support, which has been extended in various forms, more so in the May 5 circular of Reserve Bank of India. Now, the government today announced the modification to the ECGL scheme," State Bank of India Chairman Dinesh Khara said.

The revised operational guidelines are being issued by National Credit Guarantee Trustee Company Ltd (NCGTC).

The scheme was valid till October 2020 and later extended to November-end. The scheme was again extended in November as part of the Atmanirbhar Bharat 3.0 package till March 31, 2021, by including the 26 stressed sectors identified by the RBI-constituted K V Kamath committee.

The scheme was further extended for three months on April 1 and subsequently widened.

Meanwhile industry chmber Ficci demanded that the quantum under ECLGS to be doubled to Rs 6 lakh crore. The chamber also expressed hope that government will keep a close watch on the situation and appropriate enhancements will be made in time, as required.