Government’s 2.0 emergency line of credit to help India Inc relaunch and grow
The finance ministry on Thursday announced the Emergency Credit Lines 2.0 Guarantee Program (ECLGS 2.0) under which troubled sectors can avail themselves of debt moratoria for up to five years, which executives say , will help revive their businesses affected by the pandemic and encourage them to invest in building new capacity.
ECGLS 2.0 will provide additional unsecured credit at capped interest rates to companies in 26 struggling sectors identified by the KV Kamath panel in October. The program also extended the deadline for the moratorium on loans from December to March next year.
The stressed sectors identified by the panel are aviation, electricity, construction, steel, roads and real estate.
The finance ministry said the duration of the additional credit under ECLGS 2.0 will be five years, including a one-year moratorium on principal repayment available until March 31, 2021. The program does not will have no cap on annual turnover, but companies are expected to have outstanding credit exceeding Rs. 50 crore and up to Rs 500 crore as of February 29 of this year.
âThe new Production Incentive Program (PLI) for 10 key sectors will lead to improved manufacturing activity in India,â said Vinayak Deshpande, managing director of Tata Projects, adding that it would stimulate the creation of new expanded facilities.
Kinara Capital CFO Aiswarya Ravi said the extension of ECLGS until the end of this fiscal year is positive. âAfter the lockdown, MSMEs (micro, small and medium enterprises) are struggling with a cash shortage. The ECLGS enables the last mile NBFCs to provide rapid assistance to small businesses to stabilize and restart their business activities, âshe said.
The Ministry of Finance said that so far Rs 2.05 trillion in additional credit has been extended to 6.1 million borrowers. Of this amount, 1.52 trillion rupees has already been paid to small borrowers, the ministry said.
âThe extension of the ECLGS to 26 troubled sectors and the increase in its loan limit is an important announcement that the Confederation of Indian Industry (CII) hoped to hear from the government. With the PLI regime for 10 manufacturing sectors, [Thursdayâs] the package including employment incentives, infrastructure strengthening and export boost greatly excites the industry at all levels, âsaid Chandrajit Banerjee, CEO of CII.
Others have accepted. âWe believe the recently announced stimulus measures will certainly stimulate economic activity, especially in the construction and infrastructure sectors. Measures such as replacing EMD (down payment) with a bid guarantee statement will bring relief to entrepreneurs, as it will reduce the locked-in capital and the cost of the bank guarantee. In addition, the deposit deposit and the performance guarantee on government tenders have been reduced to 3% instead of 5 to 10% previously, which is a positive development for all sectors of the government. construction and infrastructure, âDeshpande said.
âThis should support the economy, which is showing early signs of recovery. The [measures] should be seen as steps in the right direction – they not only offer immediate support to the economy, but also respond to longer term considerations such as strengthening infrastructure and creating jobs, âsaid Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank.