To provide much-needed relief to several sectors battered by the second wave of coronavirus pandemic, finance minister Nirmala Sitharaman on Monday increased the limit of Emergency Credit Line Guarantee Scheme (ECLGS) to Rs 4.5 lakh crore from the existing Rs 3 lakh crore. Launched as a part of Atma Nirbhar Bharat Package in 2020, the ECLGS scheme aims to provide 100 per cent guaranteed coverage to the banks, non-banking financial institutions (NBFCs) and other lending institutions in order to enable them to extend emergency credit to business entities that have suffered due to the Covid-19 pandemic.
Under ECLGS scheme, the government has disbursed Rs 2.69 lakh crore to 1.1 crore units by 12 Public Sector Banks, 25 private sector Banks and 31 Non-banking financial companies, Sitharaman said on Monday. The central government provided Rs 4,000 crore to contact intensive sector under ECLGS scheme. The limit of admissible guarantee and loan amount proposed to be increased above existing level of 20% of outstanding on each loan, said finance minister on Monday.
“The government decision to increase the limit of the ECLGS limit by another Rs 1.50 lakh crore is a step in the right direction. It will help the eligible entities to raise additional funds at low costs to enable them to meet their liabilities and restart their operations,” said Girish Rawat, partner, L&L Partners.
Sitharaman also announced Rs 1.1 lakh crore loan guarantee scheme for Covid-19 affected sectors, including the healthcare sector. Out of this, an amount of Rs 50,000 crore will be fixed for healthcare sector and other sectors will get a financial support of Rs 60,000 crore.
The credit guarantee scheme is aimed at scaling medical infrastructure, finance minister said. It will provide a guaranteed cover for expansion and new projects related to health or medical infrastructure in cities other than eight metropolitan cities. A maximum loan of Rs 100 crore with a guarantee duration of up to three years will be provided. The interest rate has been capped at 7.95 per cent.
Last month, the finance ministry expanded the scope of the Rs 3 lakh crore ECLGS by including concessional loans to hospitals for setting up on-site oxygen generation plants. Besides, the validity of the scheme was earlier extended by three months to September 30 and or till guarantees for an amount of Rs 3 lakh crore are issued. The last date of disbursement under the scheme has been extended to December 31.
“The government move is timely. It will ensure that the health infrastructure is upgraded to meet not just this but also any future challenges. I hope that this trend of increasing spending on health continues, even after we have defeated Covid-19,” said Mathew Chacko, partner, Spice Route Legal.
“FM Sitharaman today announced eight economic relief package including four new ones to boost economic recovery. It was largely aimed at extending support to the worst affected sectors due to the pandemic. The limit enhancement is positive for the banks or NBFCs as ECLGS scheme aims to provide 100% guaranteed coverage in order to enable them to extend emergency credit to covid affected sectors,” said Siddhartha Khemka, head – retail research, broking & distribution, Motilal Oswal Financial Services Ltd.