Context: The Government Sunday expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) to provide more relief to various sectors of the economy.

Key Features of ECLGS 4.0:

  • Recently Emergency Credit Line Guarantee Scheme (ECLGS) to provide more relief to:
    • Small Businesses,
    • Bring the aviation sector under its ambit and
    • Provide a concessional credit facility of up to Rs 2 crore in loans for setting up on-site oxygen generation plants at healthcare facilities.
  • The overall size of ECLGS, however, has been kept at Rs 3 lakh crore, out of which about Rs 45,000 crore is left to be sanctioned.
  • Those who have already availed loans under the scheme can get additional assistance of up to 10 per cent of outstanding dues as of February 29, 2020.
  • The Union Finance Ministry has also removed the current ceiling of Rs 500 crore of outstanding loans for eligibility under ECLGS. 
    • Subject to maximum additional assistance to each borrower is limited to 40 per cent or Rs 200 crore, whichever is lower.
    • Since there is a loan cap of Rs 200 crore per company, the new scheme should be able to accommodate a large number of stressed entities.
    • Under the ECLGS scheme to help companies tide over the liquidity crunch due to Covid-19 banks provide additional loans to existing borrowers without asking for extra collateral.
      • To encourage banks, these loans are fully guaranteed by the Government against credit losses.

Limitation of the Scheme:

  • The scope of the scheme had been expanded thrice before.
  • The scheme will be valid till September 2021 or till the guarantee amount of Rs 3 lakh crore is exhausted, while disbursements are permitted till December 2021.

Public Sector Bank (PSB) Initiatives:

  • The public sector banks have announced that they are joining hands to offer standardised loans to healthcare facilities and individuals under the Covid loan book proposed by the RBI and the ECLGS.
    • Under this, the borrowers will be able to avail a tenure of five years in the revised ECLGS scheme (as against four years earlier) with repayment of interest only for the first 24 months, and of principal and interest in the next 36.
  • PSBs will offer loans up to Rs 100 crore at concessional rates for hospitals, nursing homes, clinics, diagnostic centres and pathology labs to set up or expand healthcare facilities.
    • It has designed three products to provide fresh lending support to 
      • Vaccine manufacturers, 
      • Hospitals and dispensaries, 
      • Pathology labs, 
      • Manufacturers and suppliers of oxygen, 
      • Ventilators, 
      • Importers of vaccines and 
      • Covid related drugs logistics firms and patients for treatment.
  • PSU banks will offer unsecured personal loans to individuals (salaried, non-salaried and pensioners) for Covid treatment at a concessional rate of interest.
  • These banks have also formulated a templated approach for restructuring loans for individuals, small businesses and MSMEs up to Rs 25 crore.
  • The RBI’s restructuring plan has been availed by 60,000 customers as against 8 lakh plus eligible. 
    • The plan covers three categories: 
      • Loans up to Rs 10 lakh for which there will be a standardised restructuring offer for certain small businesses and MSMEs; 
      • Above Rs 10 lakh and up to Rs 10 crore; and 
      • Above Rs 10 crore.

Experts Suggestions:

  • The new scheme ECLGS 4.0 provides financial support to the critical healthcare sector, and banks will go all out quickly in disbursing the loans.
    • So, the government needs to increase the limit of Rs 3 lakh crore. (FICCI suggested doubling this to Rs. 6 lakh crore).
    • Higher allocation will help the tailing civil aviation sector as well.

Related Facts:

Emergency Credit Line Guarantee Scheme (ECLGS):

  • The scheme was launched as part of the Atma Nirbhar Bharat Abhiyan package announced in May 2020 to mitigate the distress caused by coronavirus-induced lockdown
  • It provides credit to different sectors, especially Micro, Small and Medium Enterprises (MSMEs).
  • The objective was to provide fully guaranteed and collateral-free additional credit to MSMEs, business enterprises, MUDRA borrowers and individual loans for business purposes.
  • Eligibility:
    • You have total credit outstanding of Rs. 25 Crore or less as on 29th Feb 2020.
    • Your turnover for 2019-20 was up to Rs. 100.
    • You have a GST registration or are not required to obtain such GST registration Udyog Aadhar or recognition as MSME is not required under this Scheme.

Source: The Hindu, The Indian Express