As part of its efforts to boost the economy in the second wave of Covid, Government Sunday expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) to make it easier for small businesses to move and serve the aviation sector Licensed credit facility of up to Rs 2 billion for loans to health care facilities for the construction of oxygen generation plants.
However, the total size of ECLGS has been kept at Rs 3 lakh crore, of which approximately Rs 45,000 crore remains to be sanctioned. Those who have already taken out loans under the program will be able to receive additional assistance of up to 10 percent of the outstanding fees starting February 29, 2020.
At the same time, public sector banks have announced that they are joining forces to offer healthcare facilities and individuals standardized loans under the Covid loan book proposed by the RBI and ECLGS.
As part of this initiative, borrowers can take advantage of a five-year term for the revised ECLGS system – compared to four years previously – with the interest being repaid only for the first 24 months and the principal and interest payments for the next 36 months.
The Union Treasury Department has also lifted the current Rs 500 billion ceiling on outstanding loans for eligibility under the ECLGS, provided the maximum additional support for each borrower is capped at 40 percent or Rs 200 billion, whichever is lower .
With a Rs 200 billion credit limit per company, the new system should be able to accommodate large numbers of stressed companies, the bankers said.
Under the ECLGS program, banks are designed to provide additional loans to existing borrowers without requiring additional collateral to help companies overcome the liquidity crisis resulting from the Covid restrictions. To encourage the banks, these loans are fully guaranteed against credit losses by the government.
The scope of the program had previously been expanded three times. The regulation applies until September 2021 or until the guaranteed amount of Rs 3 lakh crore is exhausted, while withdrawals are permitted until December 2021.
FICCI President Uday Shankar welcomed the recent move and highlighted the need to increase the limit of Rs 3 Lakh Crore. “The new ECLGS 4.0 system provides financial support for the critical health sector and we hope that the banks will do everything in their power to pay off the loans quickly and on time. It would have helped if a higher allocation had also been made under this system. FICCI had requested to double the quantum to Rs 6 lakh crore, ”he said.
“These initiatives, which all PSU banks have taken jointly, are an important step in the right direction to mitigate the financial impact of the resurgence of Covid on all affected segments of borrowers,” said SBI Chairman Dinesh Khara.
“Stressed sectors like civil aviation and tourism are already known. The civil aviation sector definitely needs a lot of support at this point,” said Rajkiran Rai, chairman of the Indian Banks Association (IBA).
At a press conference on Sunday, Khara and Rai said PSU banks would offer individuals unsecured personal loans for Covid treatment at a cheap rate – for SBI, the rate is 8.5 percent. These loans start at a minimum of Rs 25,000 and are repayable over a five year period.
Similarly, public sector banks will offer preferential loans of up to Rs.100 billion to hospitals, nursing homes, clinics, diagnostic centers and pathology laboratories to set up or expand healthcare facilities, Rai said.
These banks have also formulated a template approach to credit restructuring for individuals, small businesses and MSMEs up to Rs.25 billion. “The idea is that there shouldn’t be any difficulties implementing it,” said Khara.
On May 5, RBI announced a new restructuring program for individuals, small businesses and MSMEs to restructure their loans in the face of the second wave. Companies that had not restructured their loans earlier and whose loans were classified as standard as of March 31, 2021 are eligible under the system. “Many credit institutions have received board approval and have started sending messages to eligible customers,” said Khara.
“Under ECLGS there is still a window for 45,000 rupees. The programs announced today will fill the remaining window, ”said Sunil Mehta, IBA’s chief executive officer.
Public sector banks have developed three products to help vaccine manufacturers, hospitals and pharmacies, pathology laboratories, oxygen, ventilator manufacturers and suppliers, vaccine importers, and logistics companies and patients for Covid-related drugs and patients re-lending.
“Healthcare business loans for the construction of oxygen systems under ECLGS are backed by 100% guarantee coverage under ECLGS 4.0, loans up to Rs 2 crore at 7.5 percent interest for hospitals and nursing homes,” said Khara.
Khara said banks would offer healthcare facility business loans of up to Rs.100 billion to build or expand healthcare infrastructure. They will also be offering unsecured personal loans – from Rs 25,000 to Rs 5 lakh – to employees, non-employees and retirees for Covid treatment, most of them at discounted rates.
So far, the RBI’s restructuring plan has been used by 60,000 customers, up from 8 lakh plus eligible ones, the SBI chairman said. The plan comprises three categories: loans up to Rs 10 lakh, for which there will be a standardized restructuring offer for certain small businesses and MSMEs; over Rs 10 lakh and up to Rs 10 crore; and about Rs 10 crore.