Eye on hospitality, cabinet clears 50k cr for ECLGS

Union Cabinet has approved Emergency Credit Line Guarantee Scheme (ECLGS) worth Rs 50,000 crore for hospitality, travel and tourism sectors.

• The additional amount has been earmarked exclusively for hospitality and allied sectors.
• The additional allocation is also aimed at incentivising lending institutions to provide additional credit of upto Rs 50,000 crore at low cost so that the sector can meet its operational liabilities.
• The revival of hospitality sector and allied industries is necessary since they provide large number of jobs and, in turn, help in aiding overall economic recovery.

Emergency Credit Line Guarantee Scheme (ECLGS):

• Emergency Credit Line Guarantee Scheme (ECLGS) launched as part of the Covid-19 relief package called the Atma Nirbhar Bharat Abhiyan.
• Aim: To provide Rs 3 lakh crore worth of collateral-free, government guaranteed loans to micro, small and medium enterprises (MSMEs) across India. It aimed to mitigate the distress caused by the coronavirus-induced lockdown.
• National Credit Guarantee Trustee Company (NCGTC) is the guarantee provider under the ECLGS scheme.

Objective of the Scheme

• Launched by Government of India as a special scheme in view of COVID-19 crisis
• To provide 100% guarantee coverage to Banks and NBFCs to enable them to extend emergency credit facilities to Business Enterprises / MSMEs in view of COVID-19 to meet their additional term loan/additional working capital requirements.

Salient Features of the Scheme

• The amount of Emergency Credit line to be extended to Business Enterprises / MSMEs would be upto 20% of total outstanding as on Feb 29,2020.
• 100% Guarantee Coverage for the additional funds sanctioned under the Emergency Credit Line Scheme.
• Business Enterprises / MSMEs with outstanding loan of upto Rs.50 crore as on February 29, 2020 and turnover of upto Rs.250 crore in FY 2019-20.
• Interest rate charged is capped at 9.25% for banks and 14% for NBFCs.
• Maximum tenure of 4 years from the date of disbursement.
• No charges / guarantee fees to be charged by MLIs/NCGTC.