Emergency Line of Credit Guarantee Scheme: Aviation, Hospitality to Earn from Extending Credit to MSMEs
The government said on Wednesday it had widened the scope of its flagship guaranteed loan program and extended its validity by one year until March 2023, in line with budget announcements.
The Ministry of Finance has also extended relief under the Rs 5 trillion Emergency Line of Credit Guarantee (ECLGS) scheme to hospitality, civil aviation and related businesses. The program was initially launched to help MSMEs, but was later expanded to benefit large companies in certain sectors as well as professionals affected by the pandemic.
Under the new standards, companies in the hospitality, civil aviation, travel and tourism sectors can now borrow up to 50% of their highest outstanding credit, up from 40% previously, according to a statement. of the Ministry of Finance. Nonetheless, borrowing by a single MSME from the hospitality, travel and tourism industry is still capped at Rs 200 crore.
However, the borrowing limit for an aviation player has been raised to Rs 400 crore from Rs 200 crore earlier.
The ministry said that to reduce the cost of accessing non-funds-based credit, bank guarantees, letters of credit and other non-funds-based facilities sanctioned under the latest version of the program ( ECLGS 3.0) will be issued without any cash margin. Fees or commissions will be capped at 0.5% per annum.
The extension of the validity of the ECLGS and the widening of its scope will benefit more companies that have not yet been able to benefit from the program, because the economic recovery has received a new blow. the Omicron spread in January and the current Ukraine. crisis, according to banking sources.
As of March 25, loans sanctioned under the ECLGS exceeded Rs 3.19 trillion, and about 95% of guarantees issued are for loans sanctioned to micro, small and medium enterprises.