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.

“The new Production Incentive Program (PLI) for 10 key sectors will lead to improved manufacturing activity in India,” 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. “After 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, ”she 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.

“The 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, [Thursday’s] the package including employment incentives, infrastructure strengthening and export boost greatly excites the industry at all levels, ”said Chandrajit Banerjee, CEO of CII.

Others have accepted. “We 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, ”Deshpande said.

“This 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, ”said Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank.

Dear reader,

Business Standard has always strived to provide up-to-date information and commentary on developments that matter to you and have broader political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these difficult times resulting from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative views and cutting-edge commentary on relevant current issues.
However, we have a demand.

As we fight the economic impact of the pandemic, we need your support even more so that we can continue to provide you with more quality content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscriptions to our online content can only help us achieve the goals of providing you with even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital editor

Comments are closed.