To provide much needed relief to many areas affected by the second wave of coronavirus pandemic, finance minister Nirmala Sitharaman On Monday, the Emergency Credit Line Guarantee Scheme (ECLGS) limit was increased to Rs 4.5 lakh crore from the existing Rs 3 lakh crore. Launched in 2020 as a part of the Atma Nirbhar Bharat package, the ECLGS scheme aims to provide 100 per cent guaranteed coverage to banks, non-banking financial institutions (NBFCs) and other lending institutions to enable them to do business in emergency situations. To be able to extend credit. Institutions that have suffered due to the Kovid-19 pandemic.
Sitharaman said on Monday that under the 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. The central government provided Rs 4,000 crore for the intensive sector connectivity under the ECLGS scheme. The Finance Minister said on Monday that it is proposed to increase the limit of admissible guarantee and loan amount from the existing level of outstanding on each loan to above 20%.
“The decision of the government to increase the ECLGS limit by Rs 1.50 lakh crore is a step in the right direction. “This will help eligible entities raise additional funds at a lower cost so that they can meet their liabilities and resume their operations,” said Girish Rawat, Partner, L&L Partners.
Sitharaman also announced a loan guarantee scheme of Rs 1.1 lakh crore for the Covid-19 affected sectors, including the health sector. Out of this, an amount of Rs 50,000 crore will be earmarked for the health sector and Rs 60,000 crore will be provided to other sectors.
The Finance Minister said that the objective of the Credit Guarantee Scheme is to augment the medical infrastructure. It will provide a guaranteed cover for expansion and new projects related to health or medical infrastructure in cities other than eight metros. A maximum loan of Rs 100 crore will be provided with a guarantee period of up to three years. The interest rate has been fixed at 7.95 per cent.
Last month, the finance ministry expanded the scope of ECLGS to Rs 3 lakh crore by including concessional loans to hospitals for setting up oxygen generation plants. In addition, the validity of the scheme was first extended by three months till September 30 or issuance of guarantee of Rs 3 lakh crore. The last date for disbursement under the scheme has been extended till December 31.
“The government’s move is timely. This will ensure that the health infrastructure is upgraded to meet not only this but any future challenges. Matthew Chacko, Partner, Spice Route Legal said, “I am hopeful that this trend of increasing health expenditure will continue even after defeating Kovid-19.
“FM Sitharaman today announced eight economic relief packages including four new ones to boost economic recovery. Its main objective was to provide assistance to the areas most affected due to the pandemic. The increase in the limit is positive for banks or NBFCs as the ECLGS scheme aims to provide 100% guaranteed coverage to enable them to extend emergency credit to the COVID affected areas,” said Siddharth Khemka, Head – Retail Research, Broking and Distribution, Motilal Oswal Said Financial Services Ltd.
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