Budget 2022: ECLGS scheme extended till March 2023 for MSMEs; guarantee limit enhanced to Rs 5 lakh cr

Credit and Finance for MSMEs: The Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs has been extended till March 2023 along with an enhanced guarantee cover by Rs 50,000 crore to take the total limit of the scheme to Rs 5 lakh crore from Rs 4.5 lakh earlier, Finance Minister Nirmala Sitharaman announced in the budget 2022 speech on Tuesday. 

“ECLGS has provided the much-needed additional credit to more than 130 lakh MSMEs. This has helped them mitigate the worst impact of the pandemic. The hospitality and related services especially those by micro and small enterprises are yet to regain their pre-pandemic level of business. Considering these aspects, ECLGS will be extended up to March 2023 and its guarantee cover will be expanded by Rs 50,000 crore to the total cover of Rs 5 lakh crore,” Sitharaman said.

“This will help the revival of the hospitality and related travel services sector as they have been the worst hit with COVID 19 and also they face the most uncertainties of the next wave. This move will give necessary stimulus for businesses to not shut down during these difficult times,” Ritesh Kumar, Partner, IndusLaw told Financial Express Online. 

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The government had in September 2021 announced the extension of the scheme to March 2022 and in June last year had increased the guarantee limit from Rs 3 lakh crore — announced at the time of the scheme’s launch in 2020 — to Rs 4.5 lakh crore.

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“The extension of ECLGS up to March 2023, with guaranteed cover extended by another Rs 50,000 crore, will substantially be used to encourage the MSME sector by ensuring their requirements of working capital which has been a subject matter of discussion during the pandemic,” Abhishek A Rastogi, Partner, Khaitan & Co told Financial Express Online. 

As of November 12, 2021, loans amounting to Rs 2.28 lakh crore were disbursed under ECLGS to MSMEs and other businesses by banks, out of Rs 2.82 lakh crore loans sanctioned, as per data from the National Credit Guarantee Trustee Company (NCGTC) cited by the Reserve Bank of India (RBI) in its Financial Stability Report. Overall, in terms of the size of their businesses, 66 per cent of the ECLGS guarantees were issued to MSMEs wherein 1.02 crore micro units received guarantees worth Rs 65,771 crore followed by 4.98 lakh small enterprises that were given Rs 66,345 crore worth guarantee. Only 2.60 lakh medium enterprises were able to get guarantees worth Rs 42,041 crore. ECLGS has been iterated multiple times since launch as ECLGS 1.0, ECLGS 1.0 (Extension), ECLGS 2.0, ECLGS 2.0 (Extension), ECLGS 3.0, ECLGS 3.0 (Extension) and ECLGS 4.0.