Govt expands ECLGS coverage ahead of festive season, economic upturn

The ECLG scheme will now end on March 31, 2022 or till guarantees for Rs 4.5 trn are issued, whichever is earlier. However, loans under the scheme can be disbursed till June 30

In order to increase utilisation of the Emergency Credit Line Guarantee Scheme (ECLGS) and provide support to small businesses ahead of the festive season and economic upturn, the government has expanded the scheme by increasing the borrowing limit for availing loans.

The ECLG scheme has been extended by six months to March 31, 2022 or till guarantees for Rs 4.5 trillion are issued, whichever is earlier. However, loans under the scheme can be disbursed till June 30.

The pace of loan sanctions under the scheme has slowed, and advances of about Rs 2.86 trillion were sanctioned as on September 24. Loans sanctioned as on July 2, were Rs 2.73 trillion. With the economic recovery and further modification of the scheme, the scheme is expected to pick up pace, an official said.

The scheme has been modified to provide credit support of additional 10 per cent or up to 40 per cent of total credit outstanding as on February 29, 2020 or March 31, 2021, whichever is higher, to existing borrowers of ECLGS 1.0 and 2.0. Those borrowers who have not availed ECLGS 1.0 and 2.0 can avail credit up to 30 per cent of credit outstanding as on March 31, 2021. Under ECLGS 1.0 and 2.0, loans loans were guaranteed up to 30 per cent of outstanding credit as on February 29, 2020.

As the cut off date to avail loans under the scheme has been changed to March 31, 2021 from February 29, 2020, existing borrowers can avail incremental credit under that limit.

“Borrowers who have availed assistance under ECLGS and whose credit outstanding as on March 31, 2021 (excluding support under ECLGS) is higher than that on February 29, 2020, shall be eligible for incremental support within the cap stipulated under ECLGS 1.0, 2.0 or 3.0,” said a statement by Ministry of Finance.

The modification introduced would ensure businesses, adversely impacted by the second wave of COVID-19, get enhanced collateral free liquidity, the statement said. “...This provides much needed support to all the ECLGS borrowers (which mainly consist of MSME units) in time for the busy / festival season,” it added.

Guarantee for MFIs fully utilised

The guarantee cover of Rs 7,500 crore provided to microfinance institutions for on lending up to Rs 1.25 lakh to small borrowers has been fully utilised, the finance ministry tweeted.

The scheme supported 92 non-banking financial companies-microfinance institutions through 20 scheduled commercial banks, the ministry said.

“The scheme played catalytic role in facilitating credit to bottom of the pyramid borrowers in these difficult times,” it said.

Under the scheme, the interest rate was capped at Marginal Cost of funds based Lending Rate (MCLR) plus 2 per cent. Maximum loan tenure is 3 years, and 80 per cent of assistance was to be used by MFI for incremental lending.