By end-February, loans of Rs 2.46 lakh crore were sanctioned under the scheme. The demand thereafter hasn’t risen much, bankers say.The government on Saturday launched a new version of its Rs three-lakh-crore guaranteed loan programme, under which cheaper credit will be made available to hospitals for setting up on-site oxygen generation plants to fight the pandemic.
It also allowed civil aviation companies, struggling to cope with the damage caused by the pandemic, to tap an earlier avatar of the Emergency Credit Line Guarantee Scheme (ECLGS) by expanding its scope.
The validity of the ECLGS has also been extended by three months through September 30 or until guarantees for the entire amount of Rs 3 lakh crore are issued, the finance ministry said in a statement. Similarly, the last date of disbursement has been extended up to December 31.
By end-February, loans of Rs 2.46 lakh crore were sanctioned under the scheme. The demand thereafter hasn’t risen much, bankers say.
Under the ECLGS 4.0 announced on Saturday, the government will offer full guarantee on 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%.
The ministry also relaxed the tenure of the loan repayment and introduced more flexibilities. Borrowers who are eligible for restructuring as per the latest RBI guidelines and had availed of loans under ECLGS 1.0 can now repay in five years. They have to repay only interest in the first two years, which will be followed by the repayment of principal and residual interest in three years thereafter.
Prior to the move, the loan tenure was four years. Borrowers were supposed to pay only interest in the first year, followed by the repayment of principal and interest in three years after that.
Moreover, the new scheme has made a provision of extra ECLGS assistance of up to 10% of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0, in sync with restructuring under the RBI guidelines of May 5, 2021.
While allowing civil aviation companies to tap the ECLGS 3.0, the government also scrapped the extant ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0. This is subject to a maximum additional ECLGS assistance of up to 40% or Rs 200 crore, whichever is lower.
Earlier, the ECLGS 3.0 covered businesses in hospitality, travel and tourism, leisure and sporting sectors. Eligible companies must have had total credit outstanding not exceeding Rs 500 crore as of February 29, 2020, 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 finance ministry said.
The tenor of loans granted under ECLGS 3.0 would be 6 years, including a moratorium period of 2 years.
The ECLGS 1.0 was announced as part of the government’s Rs 21 lakh-crore relief package in May 2020. Under this, the government had pledged full guarantee for up to 20% extra, collateral-free working capital loans, subject to the Rs three-lakh-crore limit. While this scheme was initially meant for only MSMEs, the government has periodically broadened its scope to enable a wider pool of businesses and professionals to benefit from it.
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