Credit and Finance for MSMEs: The Federation of Hotel & Restaurant Associations of India (FHRAI) recently requested extension of the Emergency Credit Line Guarantee Scheme (ECLGS) loan term for the hospitality sector for a maximum period under the current provisions, as per a report by the Economic Times. The FHRAI delegates met Narayan Tatu Rane, minister for Micro, Small & Medium Enterprises (MSMEs), and submitted a representation regarding the extension request.
The Association thanked the MSME Minister for the enhanced ECLGS limit from Rs 4.5 lakh crore to Rs 5 lakh crore and at the same time told him that the measure is inadequate to mitigate the losses incurred by the hospitality sector.
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FHRAI urged to either enhance the repayment period to 10 years or increase the loan repayment period of the principal loan, whichever is longer, the report said. It has also highlighted that the six-year period is too short for the sector to avail the desired benefits of the scheme. Most of the beneficiaries of the scheme have already mortgaged their properties as surety against the principal loan. Therefore, if the ECLGS loan is not in accordance with the earlier loan, it would lead to payment defaults and a huge number of Non Performing Assets (NPAs) in the sector.
The tenor of loans granted under ECLGS 3.0 is six years including a moratorium period of two years, whereas the same under ECLGS 1.0 is four years and under ECLGS 2.0 it is five years with one year moratorium, as per the report.
What needs to be noted is that many hospitality businesses have availed the loans under ECLGS 1.0 and 2.0 and the repayment period for these loans have already started in most of these cases. Hence, FHRAI has appealed to the minister to rationalise the norms for all ECLGS loans for the sector.
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The association has also shared with the minister that the eligibility criteria to apply for a loan is quite stringent. The complex process to apply for loan makes it difficult for entities to avail loans, therefore FHRAI has requested the Government to ease out eligibility criteria and also simplify loan application process via a single-window or single-click clearance.
In order to make the ECLGS scheme efficient and effective, FHRAI urged that the tenure of the loan term be increased.