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Last updated: 31 May, 2021  

Rupee.9.Thmb.jpg ECLGS 4.0: More benefits to MSMEs

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Bikky Khosla | 31 May, 2021

In a welcome move, the Central government last week modified the Emergency Credit Line Guarantee Scheme (ECLGS) to extend its scope further. The Finance Ministry, while making the announcement, viewed that these changes will provide additional support to MSMEs and help various sectors hit severely by the second wave of the Covid-19 pandemic. ECLGS has already proved beneficial for our MSMEs, and now ECLGS 4.0 holds more promise for the sector.

First of all, the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0 is removed, subject to maximum additional ECLGS assistance to each borrower being limited to 40 percent or Rs 200 crore, whichever is lower. This move is encouraging as it would bring in more small businesses under ambit of the scheme. Moreover, additional ECLGS assistance of up to 10 percent of the outstanding credit as of February 29, 2020, is now offered to borrowers covered under ECLGS 1.

The statement adds that borrowers who are eligible for restructuring and had availed loans under ECLGS 1.0 of overall tenure of four years comprising of repayment of interest only during the first 12 months with repayment of principal and interest in 36 months thereafter will now be able to avail a tenure of five years for their ECLGS loan. Also, validity of the scheme is now extended to September 30, 2021 or till guarantees for an amount of Rs.3 lakh crore are issued.

Besides the aforesaid MSME-friendly measures, the scheme is now extended to bring the civil aviation sector under its ambit. This is no doubt good news for the sector which has been hit hard by the pandemic. In addition, hospitals, nursing homes, clinics and medical colleges will now get 100 guarantee cover to loans up to Rs 2 crore for setting up on-site oxygen generation plants. At a time when there is a severe shortage of medical oxygen, this is welcome decision again.

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