Centre expands scope of ECLGS to Civil aviation, removes loan outstanding ceiling for a few sectors

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The Centre, on May 30, further expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) by adding the Civil Aviation Sector and loans for oxygen generation plants under the scope of the scheme.

Additionally, as per an official statement, the government also removed the loan outstanding ceiling of Rs 500 crore on sectors like hospitality, travel and tourism, leisure and sporting, and civil aviation, which means that even bigger entities with even higher outstanding loans in these sectors can avail of the ECLGS scheme.

However, the maximum additional loans they can take under the scheme is limited to 40 percent of the outstanding loan or Rs 200 crore, whichever is lower.

“The inclusion of the Civil Aviation Sector under the Emergency Credit Line Guarantee Scheme is a welcome and timely move by the government that should help the sector that has been the most severely impacted by the COVID-19 pandemic,” said Ajay Singh, Chairman and Managing Director of Spicejet.

“World over, we have seen governments come to the rescue of their airlines multiple times over the last one year. Airlines in Indian have been at the very forefront of this war against COVID and the government’s recognition of the difficulties being faced by our industry is certainly a move in the right direction,” Singh said.

Relaxations to MSMEs

In a press release on May 30, the Finance Ministry said these steps were being taken to help businesses still reeling from COVID-19, especially in light of a devastating second wave.

“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 ECLGS,” the statement said.

Read: Explained | All you need know about the Emergency Credit Line Guarantee Scheme

“100 percent guarantee cover will be extended to loans of up to Rs 2 crore given to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants. The interest rate has been capped at 7.5 percent for the same,” the Ministry said.

"The scheme provides much needed support to boost and provide credit to the health care infrastructure in addition to the other relaxation’s provided and is definitely a step in the right direction to help other ailing sectors as well," said Karan Mitroo, Partner, L&L Partners.

When ECGLS started out as part of the ‘Aatmanirbhar Bharat’ set of announcements, it was primarily aimed at helping micro, small and medium enterprises. With later additions, the scope of the scheme was increased.

For the MSMEs, the loan tenure was increased to five years from four years, thus allowing them to repay interest only for the first 24 months with repayment of principal and interest in 36 months thereafter, compared to 12 months and 36 months respectively, earlier.

Further, the validity of ECLGS has been extended to September 30, 2021, or till guarantees for an amount of Rs 3 lakh crore are issued. Disbursement under the scheme has been permitted up to December 31, 2021.

The government also announced additional ECLGS assistance of up to 10 percent of the outstanding as on February 29, 2020 to MSME borrowers, in tandem with restructuring as per RBI guidelines of May 05, 2021. The earlier assistance under the RBI guidelines was 20 percent, which means the ECLGS assistance to MSMEs now stands at 30 percent of outstanding loans.

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

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