As part of its efforts to prop up the economy amid the second wave of Covid, the government on Sunday expanded the scope of the Emergency Line of Credit Guarantee Scheme (ECLGS) to provide more relief to small businesses, bringing back the aviation sector under his supervision and provide a concessional credit facility of up to Rs 2 crore in the form of loans for health establishments in order to set up oxygen production plants.
The overall size of the ECLGS, however, has been kept at Rs 3 lakh crore, of which around Rs 45,000 crore remains to be sanctioned. Those who have already received loans under the program can obtain additional assistance of up to 10% of the unpaid contributions as of February 29, 2020.
Simultaneously, public sector banks have announced that they are teaming up to offer standardized loans to healthcare facilities and individuals under the Covid loan portfolio offered by the RBI and ECLGS.
As part of this initiative, borrowers will be able to benefit from a five-year tenure in the revised ECLGS regime – up from four years earlier – with repayment of interest only for the first 24 months, and principal and interest for the next 36. .
The Union Ministry of Finance has also removed the current ceiling of Rs 500 crore on current ECLGS loans, subject to the maximum additional aid to each borrower being limited to 40% or Rs. 200 crore, whichever is lower.
Since there is a loan limit of Rs 200 crore per company, the new system should be able to accommodate a large number of stressed entities, the bankers said.
As part of the ECLGS program to help businesses overcome the liquidity crisis resulting from the Covid restrictions, banks are providing additional loans to existing borrowers without asking for additional collateral. To encourage the banks, these loans are fully guaranteed by the government against credit losses.
The scope of the program had been extended three times previously. The program will be valid until September 2021 or until the guarantee amount of Rs 3 lakh crore is exhausted, while disbursements are allowed until December 2021.
Welcoming the latest decision, FICCI President Uday Shankar raised the need to increase the limit to Rs 3 lakh crore. “The new ECLGS 4.0 program provides financial support to the critical health sector, and we hope that banks will do everything possible to disburse loans in a quick and timely manner. It would also have helped if a higher allowance had also been made under this scheme. The FICCI had requested that the quantum be doubled to Rs 6 lakh crore, ”he said.
“These initiatives taken by all the PSU banks by coming together … are an important step in the right direction to mitigate the financial impact due to the resurgence of Covid on all the borrower segments concerned”, said the president of the SBI, Dinesh Khara.
“Sectors in difficulty are already well known, such as civil aviation and tourism… (the) civil aviation sector certainly needs a lot of support at the moment,” said Rajkiran Rai, president of the Association. Indian banks (IBA).
At a press conference on Sunday, Khara and Rai said PSU banks will offer unsecured personal loans to individuals for Covid treatment at a concessional interest rate – for SBI the rate will be 8.5%. These loans will start at a minimum of Rs 25,000 and can be repaid over five years.
Likewise, public sector banks will offer loans of up to Rs 100 crore at concessional rates for hospitals, nursing homes, clinics, diagnostic centers and pathology laboratories to create or expand facilities. health, Rai said.
These banks have also formulated a model approach for restructuring loans to individuals, small businesses and MSMEs up to Rs 25 crore. “The idea behind it is that there shouldn’t be any difficulty in terms of implementation,” Khara said.
On May 5, the RBI announced a new restructuring plan for individuals, small businesses and MSMEs to restructure their loans in light of the second wave. Entities that had not restructured their loans previously, with loans classified as standard as of March 31, 2021, are eligible for the scheme. “Many lending institutions have gotten board approval and have started sending messages to eligible customers,” Khara said.
“Under ECLGS, there is still a window for Rs 45,000 crore. The projects announced today will exhaust the remaining window, ”said Sunil Mehta, CEO of IBA.
Public sector banks have designed three products to provide new lending support to vaccine manufacturers, hospitals and clinics, pathology laboratories, oxygen manufacturers and suppliers, ventilators, vaccine importers, and healthcare companies. logistics of drugs related to Covid and patients to be treated.
“As part of the loans to healthcare companies for the establishment of oxygen plants under ECLGS, loans up to Rs 2 crore at an interest rate of 7.5% for hospitals and Nursing homes are 100% guaranteed under ECLGS 4.0, ”Khara said.
Khara said banks would offer business loans for health facilities up to Rs 100 crore to build or expand health infrastructure. They will also offer unsecured personal loans – from Rs 25,000 to Rs 5 lakh – for employees, non-employees and retirees for Covid treatment, most at concessional interest rates.
So far, the RBI restructuring plan has been used by 60,000 clients versus 8 lakh more eligible, said the SBI chairman. The plan covers three categories: loans up to Rs 10 lakh for which there will be a standardized restructuring offer for certain small businesses and MSMEs; above Rs 10 lakh and up to Rs 10 crore; and, above Rs 10 crore.