Coronavirus – Economic Issues

Centre raises credit limit under ECLGS

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ECLGS Scheme

Mains level : Not Much

The Ministry of Finance has raised the credit limit for airlines under the Emergency Credit Line Guarantee Scheme (ECLGS), making them eligible for a sum equivalent to 100% of their outstanding debt, up to a maximum of ₹1,500 crore.

Boost for Aviation sector

  • Earlier, airlines were eligible to borrow up to 50% of their credit outstanding up to ₹400 crore.
  • This is the second time the government has liberalized the scheme for the aviation sector.
  • The scheme introduced for medium and small enterprises during the outbreak of the COVID-19 pandemic was extended till March 2023 and its guarantee cover expanded by ₹50,000 crore to ₹5 lakh crore.

What is ECLGS?

  • Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
  • The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
  • The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.

Aims and objectives

  • The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
  • The main objective is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.
  • It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.

Salient features of ECGLS

  • The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
  • Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
  • No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
  • Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

 

 

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