Govt widens scope of loan guarantee scheme

The Finance Ministry on Wednesday expanded the scope of the Rs 5 lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS) to support MSMEs engaged in travel, tourism and hospitality sectors to overcome the impact of the COVID-19 pandemic impact.

The coverage, scope and extent of benefits under ECLGS 3.0 pertaining to hospitality, travel, tourism and civil aviation sectors have been expanded, the ministry said in a statement.

Finance Minister Nirmala Sitharaman while announcing the Budget 2022-23 had extended the validity of the scheme by another one year till March 2023, and also increased the total amount to be sanctioned under the scheme from Rs 4.5 lakh crore to Rs 5 lakh crore.

As per the latest modification, new borrowers, in the sectors covered under ECLGS 3.0, who have borrowed between March 31, 2021, and January 31, 2022, will now be eligible to avail the emergency credit facilities.

Also, the credit limit for eligible borrowers has been increased to 50 per cent of their fund-based credit outstanding from 40 per cent earlier.

“Eligible borrowers in all such sectors (other than the civil aviation sector) are now permitted to avail up to 50 per cent of their highest fund-based credit outstanding on any of three reference dates (Feburary 29, 2020, March 31, 2021 and January 31, 2022), as against the earlier limit of 40 per cent of the higher of their fund-based outstanding on either of two reference dates (February 29, 2020 and March 31, 2021),” the ministry said.

The enhanced limit is subject to a maximum of Rs 200 crore per borrower, it added.

Individuals and proprietary concerns in the sectors covered under ECLGS 3.0 can also now avail of emergency credit facilities.

The fresh modifications are aimed at enabling businesses in these contact-intensive sectors to get further support through enhanced coverage and collateral-free liquidity on capped interest rates/fees, it said.

Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, the ministry said, eligible borrowers in the civil aviation sector are now permitted to avail of non-fund based emergency credit facilities as well under ECLGS 3.0.

As against the earlier limit of availing up to 40 per cent of their fund-based outstanding, borrowers can now avail up to 50 per cent of their highest total fund and non-fund based credit outstanding.

Further, to lower their cost of accessing non-fund-based credit, bank guarantees, letters of credit and other non-fund based facilities sanctioned under ECLGS 3.0 will be issued without any cash margin and subject to a cap of 0.5 per cent per annum on the fee/commission, it said.

Since its launch in May 2020, loans worth Rs 3.19 lakh crore has been sanction till March 25, 2022. About 95 per cent of the guarantees issued are for loans sanctioned to micro, small and medium enterprises.