To help small businesses cope with the economic crisis caused by the explosive growth of Covid-19 infections, the Treasury Department decided on Sunday to expand the scope of the Emergency Credit Line Guarantee Scheme (ECLGS). Entrepreneurs, especially those with limited capacity, have urged the government to extend the system as government lockdowns have adversely affected their businesses and limited their ability to repay bank loans.
The government of the Union has decided to extend the validity of the system until September 30, 2021 or until guarantees for an amount of £3 trillion will be spent. The payment under the scheme is permitted until December 31, 2021.
According to a statement by the Treasury Department, borrowers who are eligible for restructuring under the RBI guidelines of May 5, 2021 and who have taken out loans under ECLGS 1.0 with a total maturity of four years have interest repayment only during the first 12 months include. With the repayment of principal and interest in 36 months thereafter, a term of five years can now be used for the ECLGS loan, i.e. the repayment of interest only for the first 24 months with the repayment of principal and interest in 36 months thereafter .
According to the statement, additional ECLGS support of up to 10% of the outstanding borrowers on February 29, 2020 will be provided for borrowers covered by ECLGS 1.0 along with a restructuring under the RBI guidelines of May 5, 2021. The ministry also announced this £500 crore loans outstanding for ECLGS 3.0 eligibility will be removed provided the maximum additional ECLGS support for each borrower is capped at 40% or less £200 crore, whichever is lower.
Civil aviation companies that have been hardest hit due to the recurrence of Covid-19 cases can also obtain loans from banks under the system. The government will also guarantee loans up to 100% £2 crore for hospitals, nursing homes, clinics and medical colleges for the construction of on-site oxygen generation systems, and the interest on such loans cannot exceed 7.5%.
“The changes in ECLGS would enhance the usefulness and impact of ECLGS by providing additional support to MSMEs, ensuring livelihoods and helping them to get back to business seamlessly. These changes will further facilitate the flow of institutional credit on reasonable terms, “the Treasury Department said in a statement.
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