The Cabinet on Wednesday decided to widen the coverage of its flagship guaranteed loan scheme by Rs 50,000 crore to Rs 5 trillion. This additional credit limit of the Emergency Credit Line Guarantee Scheme (ECLGS), however, has to be used for lending only to hospitality and related enterprises, information and broadcasting minister Anurag Thakur said after a Cabinet meeting.
So far, loans of Rs 3.67 trillion have been sanctioned under the ECLGS since its inception in 2020.
The elevated coverage reflects the need for a protracted period of succour to startups and small businesses as they grapple with the spread of the latest Covid strain.
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In the Budget for FY23, finance minister Nirmala Sitharaman had proposed to widen the coverage to Rs 5 trillion and also extend the validity of the ECLGS by a year through March 2023.
“With high immunisation levels, progressive roll-back of restrictions and overall economic recovery, conditions are in place for sustained growth in demand for these sectors as well. This additional guarantee cover is expected to support the recovery of these sectors as well,” according to an official statement on Wednesday.
The enhanced limit and the extension of the ECLGS validity are aimed at benefiting a wider pool of businesses that haven’t been able to tap the scheme yet.
Highlighting the success of the ECLGS during the presentation of the Budget, Sitharaman had said as many as 13 million MSMEs had been provided additional credit under this scheme. Separately, according to a report by SBI group chief economic advisor Soumya Kanti Ghosh earlier this year, the ECLGS has prevented 1.35 million MSME accounts from turning bad. It has saved around 15 million jobs and prevented 14% of outstanding MSME loans from turning into non-performing assets, the report said.