Extension of ECLGS:  Finance Minister Nirmala Sitharaman said in her budget presentation that the Emergency Credit Line Guarantee Scheme (ECLGS) will be extended to cover the next fiscal as well, with an expanded guarantee cover of Rs 5 lakh crore.

Key Highlights:

• The ECLGS that was introduced by the Finance Ministry in 2020 to help Micro, Small and Medium Enterprises (MSMEs) amid the COVID-19 pandemic has been extended to March 2023.
• An additional guarantee amount of Rs 50,000 crore has also been announced for the hospitality sector

The purpose for extension of ECLGS:

• Under ECLGS, which is for helping companies tide over liquidity crunch resulting from Covid-19 curbs, banks provide additional loans to existing borrowers without asking for extra collateral.
• To encourage banks, ECLGS aims to provide 100% guaranteed coverage to the banks, non-banking financial institutions (NBFCs) and other lending institutions against credit losses.
• This scheme will be the key to ensure that MSMEs impacted by intermittent lockdowns in states get funding to stay afloat.
• Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans.
• Hotels, restaurants, caterers, canteens, marriage halls, tour operators, as well as theatres and amusement parks can avail the facility.
• However, accounts that are classified as non-performing assets or where overdues have crossed 60 days (SMA-II) are not eligible.

Background:

ECLGS 1.0:

• The Emergency Credit Line Guarantee Scheme (ECGLS) was launched by the Government of India (GoI) as part of its Rs 20 lakh crore comprehensive packagepackage called the Aatmanirbhar Bharat Abhiyan.
• The ECGLS was announced by the Finance Ministry on May 13, 2020.
• The scheme aimed to provide Rs 3 lakh crore worth of collateral-free, government-guaranteed loans to micro, small and medium enterprises (MSMEs) across India to mitigate the distress caused by the coronavirus-induced lockdown
• Under this, credit under GECL would be up to 20% of the borrower’s total outstanding credit up to Rs 25 crore as on February 29, 2020.
• Also, interest rate was capped at 9.25% for banks and 14% for NBFCs.
• In addition to this, 100% guarantee for additional funding up to Rs 4.5 lakh crore for Covid-affected MSMEs was sanctioned.
• It had a 1-year moratorium period and a 4-year repayment period.
• The scheme was valid till October 2020 but was later extended till November end.

ECLGS 2.0:

• In November 2020, Finance Minister Nirmala Sitharaman announced the launch of ECLGS 2.0 by extending the Rs 3 lakh crore scheme to support 26 stressed sectors identified by the Kamath Committee and the healthcare sector.
• The scheme was valid till March 31, 2021.
• These sectors included power, construction, iron and steel manufacturing, roads, real estate, textiles, chemicals, consumer durables, non-ferrous metals, pharma manufacturing, logistics, gems and cement, auto components, jewellery, mining, plastic product manufacturing, automobile manufacturing, auto dealerships, aviation, sugar,  hotels-restaurants-tourism,  ports and port services, shipping, building materials, and corporate retail outlets.
• The tenor of the credit under ECLGS 2.0 was five years, including a one-year moratorium.
• Companies with dues of Rs 50-500 crore as on February 29, 2020 were eligible, as announced by Sitharaman.
• The ceiling for outstanding credit was increased from Rs 25 crore to Rs 50 crore under ECLGS 2.0.
• The Finance Minister also announced that the ECLGS 1.0 and ECLGS 2.0 would be valid till March 31, 2020.

ECLGS 3.0:

• In order to support the Hospitality, Sporting sectors, Travel and Tourism, and  Leisure,which are among those most affected by the Covid-19 pandemic, the government on March 31 widened the scope of the Rs 3 lakh crore scheme by announcing ECLGS 3.0.
• Under ECLGS 3.0, business enterprises in the hospitality, travel and tourism, leisure and sporting sectors would be able to avail credit under the scheme.
• It also extended ECLGS 1.0 and ECLGS 2.0 by another 3 months, along with ECLGS 3.0, to June 30, 2021.
• ECLGS 3.0 involves the extension of credit of up to 40 percent of the total credit outstanding across all lending institutions as of February 29, 2020, from 20 percent earlier.
• The tenor of loans granted under ECLGS 3.0 is six years, including a moratorium period of two years.
• The scheme will only consider loans less than 60 days overdue as on February 29, 2020, with total credit outstanding not exceeding Rs 500 crore.

Other announcements:

• The finance minister also said that the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with required infusion of funds.
• This will facilitate additional credit of Rs 2 lakh crore for MSMEs and expand employment opportunities.
• She also announced to interlink Udyam, e-Shram, NCS and ASEEM portals to widen their scope.
• To help the MSME sector become more resilient and competitive, Sitharaman said a Raising and Accelerating MSME Performance (RAMP) programme with an outlay of Rs 6,000 crore over five years will be rolled out.