To help small businesses tide over the prevailing economic crisis generated by the explosive growth in cases of covid-19 infections, the finance ministry on Sunday decided to enlarge the scope of the Emergency Credit Line Guarantee Scheme (ECLGS). Business owners, especially the ones with limited capacity, have been urging the government to extend the scheme as the state-wise lockdowns have adversely impacted their businesses and limited their ability to repay loans taken from banks.
The Union government has decided to extend the validity of the scheme till 30 September 2021 or till guarantees for an amount of ₹3 trillion are issued. Disbursement under the scheme will be permitted up to 31 December 2021.
According to a statement issued by the ministry of finance, borrowers who are eligible for restructuring as per RBI guidelines of 5 May 2021, and had availed loans under ECLGS 1.0 of overall tenure of four years comprising 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.
Additional ECLGS assistance of up to 10% of the outstanding as on 29 February 2020 to borrowers covered under ECLGS 1.0, in tandem with restructuring as per RBI guidelines of 5 May 2021, will be provided, according to the statement. The ministry also informed that ₹500 crore of loan outstanding for eligibility under ECLGS 3.0 will be removed, subject to maximum additional ECLGS assistance to each borrower being limited to 40% or ₹200 crore, whichever is lower.
Companies in the civil aviation sector which has been one of the most adversely impacted due to the resurgence in covid-19 cases, will also be able to get credit from the banks under the scheme. The government will also give 100% guarantee cover to loans up to ₹2 crore to hospitals, nursing homes, clinics and medical colleges for setting up on-site oxygen generation plants and interest for such loans cannot exceed 7.5%.
“The modifications in ECLGS would enhance the utility and impact of ECLGS by providing additional support to MSMEs, safeguarding 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 in a statement.
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