The Emergency Credit Line Guarantee Scheme (ECLGS) announced by the Government has so far worked it magic. According to reports, the credit guarantee scheme has benefitted over 11 million businesses and individuals.
ECLGS was rolled out by the Government in a bid to alleviate pressure on the flailing economy. The pandemic has left the economy in a less-than healthy state and several sectors are on the verge of collapse. The scheme’s aim is to provide working capital and emergency funds to critical sectors.
So far banks have disbursed around Rs 2.13 lakh crore out of the Rs 4.5 lakh crore that was earmarked for ECLGS. ECLGS will provide a 100 per cent repayment guarantee to banks, non-banking financial institutions (NBFCs) and other lenders in exchange for them providing much-needed loans and capital to businesses struggling to make ends meet due to the pandemic.
The ECLGS was initially conceived by the Government to provide support to smaller businesses that would struggle to secure loans and financial help. Smaller businesses have found the scheme beneficial, with many avoiding bankruptcy and insolvency due to emergency funds secured through ECLGS. However, certain industries are calling for more direct support and measures to help boost their businesses to pre-COVID standards.
Finance Minister, Nirmala Sitharaman, had earlier announced that the upper limit of ECLGS would be increased by 50 per cent from Rs 3 lakh crore to Rs 4.5 crore. The minister had also stated more sectors would be included within the folds of the scheme.
Focusing on the smaller and micro-business, over 85 per cent of all guarantees have been provided to businesses that were established with an investment below Rs 1 crore and having a turnover of less than Rs 5 crore. Official data collected till July 3 revealed that private sector banks have already loaned out Rs 1.08 lakh crore under the scheme. Public sector banks followed closely with Rs 90,315 crores disbursed and NBFCs with Rs 14,047 crore.
The scheme has been extended to cover 30 sectors ranging from trade to services and manufacturing industries. The last date for disbursement under ECLGS has been extended to December 31, 2021.