MUMBAI: The government on Sunday expanded a scheme to guarantee loans to Covid-hit businesses to cover the aviation sector with maximum assistance for a borrower capped at Rs 200 crore. The fourth iteration of the Emergency Credit Line Guarantee Scheme (ECLGS), which has been extended up to September 30, will also fully guarantee loans up to Rs 2 crore to hospitals for setting up oxygen plants.
The ECLGS was introduced by the government to mitigate hardships to small businesses after the first phase of the lockdown last year. Under ECLGS 4.0 an additional 10% of credit limits can be provided and more time be given to eligible borrowers. The current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0 has been removed, subject to maximum additional ECLGS assistance to each borrower being limited to 40% or Rs.200 crore, whichever is lower.
The scheme provided for guarantees on loans up to Rs 3 lakh crore.
SBI chairman Dinesh Khara said the scheme had proved its value in the first phase of the pandemic. Banks have sanctioned loans of up to Rs 2.54 lakh crore under the scheme of which Rs 2.4 lakh crore has been disbursed. This would mean that banks have headroom to take up fresh proposals worth Rs 45,000 crore.
In ECLGS 1.0, borrowers could avail of a loan of four years and repay only interest for the first year. If eligible for restructuring, they can now extend the loan for five years by repaying only the interest component in the first two years.
“Our preliminary assessment is that we should be in a position to build a book of about Rs 2,000 crore,” said Khara referring to fresh loans under the ECLGS 4.0. The loans to hospitals, nursing homes and medical colleges for setting up an oxygen plant would be available at a concessional interest rate of 7.5%
Addressing a press conference Rajkiran Rai, chairman of, Indian Banks Association and MD, Union Bank of India said that the contours of the scheme have been shared with other banks and while each lender may tweak it according to its policies, most banks would be able to launch the schemes soon.
“With the second wave of Covid-19 and incremental stress on debt servicing of the borrowers, relief measures under ECLGS will support liquidity position of the borrowers, apart from incremental stress on the asset quality of lenders. The government will also not be burdened with additional cost because of the second wave and this will also improve the utilisation of overall ECLGS funding pool available,” said Anil Gupta, vice president, financial sector ratings ICRA.