Emergency Credit Line Guarantee Scheme
Source : PIB
GS IiI : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Why in News ?
Government has further enlarged the scope of Emergency Credit Line Guarantee Scheme as under as a result of this COVID pandemic.
- This incorporates ECLGS 1.0, ECLGS 2.0, ECLGS 3.0 and ECLGS 4.0
What is Emergency Credit Line Guarantee Scheme ?
- Emergency Credit Line Guarantee Scheme (ECLGS) aims to provide 100 percent guaranteed coverage to the banks, non-banking financial institutions (NBFCs) and other lending institutions.
- Thus these banks can enable emergency credit to business entities that have suffered due to the Covid-19 pandemic
- Also for those who are struggling to meet their working capital requirements.
- ECLGS was launched as part of the Rs 20 lakh crore Covid-19 relief package called the Aatmanirbhar Bharat Abhiyan.
What is ECLGS 1.0, ECLGS 2.0, ECLGS 3.0, ECLGS 4.0 ?
- ECLGS 1.0 : Had a 1-year moratorium period and a 4-year repayment period.
- Under the scheme, borrowers could avail of additional credit of up to 20 percent of their overall outstanding credit.
- Aimed to provide Rs 3 lakh crore worth of collateral-free, government-guaranteed loans to micro, small and medium enterprises (MSMEs)
- ECLGS 2.0 : Launch of ECLGS 2.0 by extending the Rs 3 lakh crore scheme to support 26 stressed sectors identified by the Kamath Committee and the healthcare sector.
What is ECLGS 1.0, ECLGS 2.0, ECLGS 3.0 and ECLGS 4.0 ? - The scheme was valid till March 31, 2021.
- The tenor of the credit under ECLGS 2.0 was five years.
- Companies with dues of Rs 50-500 crore as on February 29, 2020 were eligible.
- ECLGS 3.0 : to support the Hospitality, Travel and Tourism, Leisure, and Sporting sectors, which are among those most affected by the Covid-19 pandemic.
- It also extended ECLGS 1.0 and ECLGS 2.0 by another 3 months, along with ECLGS 3.0, to June 30, 2021.
- Extension of credit of up to 40 percent of the total credit outstanding across all lending institutions as of February 29, 2020, from 20 percent earlier.
- The tenor of loans granted under ECLGS 3.0 is six years.
- ECLGS 4.0 : It is recently announced.
- 100% guarantee cover to loans up to Rs.2 crore to hospitals/nursing homes/clinics/medical colleges for setting up on-site oxygen generation plants, interest rate capped at 7.5%.
- Ceiling of Rs. 500 Cr. of loan outstanding for eligibility under ECLGS 3.0 to be removed.
- Civil Aviation sector to be eligible under ECLGS 3.0.
- Validity of ECLGS extended to 30.09.2021 or till guarantees for an amount of Rs.3 lakh crore are issued.
What is moratorium
- Lending institutions were directed to defer the EMIs of their customers opting for this moratorium scheme.
- In fact it is a temporary suspension of activity until future events warrant lifting of the suspension or related issues have been resolved.
- A moratorium period is the time during a loan term when the borrower is not required to make any repayment.
- Paying loan within the moratorium period helps to reduce the interest cost.
- In normal case Education loans provide this feature.
- Other reason for moratorium are the aftermath of earthquakes, floods, droughts or disease outbreaks or any emergency moratorium on some financial activities may be granted by a government or the central bank.
Daily Current Affairs : Click Here
[…] Emergency Credit Line Guarantee Scheme […]