Emergency Credit Line Guarantee Scheme supporting MSME, now helping airlines in stress
An efficient and strong civil aviation sector is increasingly becoming vital for the economic development of the country. Recognising its importance for the economic growth, the Department of Financial Services (DFS), Ministry of Finance, has modified the Emergency Credit Line Guarantee Scheme (ECLGS) to enhance the maximum loan amount eligibility for airlines under ECLGS 3.0 to 100% of their fund based or non-fund-based loan outstanding as on the reference dates or Rs. 1,500 crore, whichever is lower and of the above Rs. 500 crore shall be considered, based on equity contribution by the owners.
All other criteria terms and conditions parameters prescribed under the operational guidelines of the ECLGS on 30.8.2022 shall be applicable as it is. The modifications introduced are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems.
ECLGS extended till March 2023
Earlier in March 2022, the Emergency Credit Line Guarantee Scheme (ECLGS) was extended beyond March 2022 till March 2023, to implement the announcement made in the union budget 2022-23 by Union Minister for Finance & Corporate Affairs Nirmala Sitharaman. Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, the eligible borrowers were permitted to avail up to 50% of their highest total fund and non-fund based credit outstanding, subject to a maximum of Rs. 400 crore per borrower.
CGSSD extended upto 31.03.2023
Government announced creation of ‘Distressed Assets Fund- – Subordinate Debt for Stressed MSMEs’ on 13th May, 2020, under the Aatma Nirbhar Bharat Package. Accordingly, a scheme namely – ‘Credit Guarantee Scheme for Subordinate Debt’ (CGSSD) was approved by the Government on 1st June, 2020 and the scheme was launched on 24th June, 2020 to provide credit facility through lending institutions to the promoters of stressed MSMEs like SMA-2 and NPA accounts, who are eligible for restructuring as per RBI guidelines on the books of the lending institutions. Initially the scheme was upto 31.03.2021.
Nirmala Sitharaman’s announcement in Budget
In order to keep the avenues of assistance to stressed MSME units open, the government had earlier extended this scheme upto 31.03.2022. Now, on the basis of the requests received from the stakeholders of the scheme, the government has decided to further extend this scheme till 31.03.2023. Giving effect to Union Finance & Corporate Affairs Minister Nirmala Sitharaman’s announcement in Union Budget 2022-23, the National Credit Guarantee Trustee Company Limited (NCGTC) had extended the Emergency Credit Line Guarantee Scheme (ECLGS) beyond March 2022, till March 2023.
Modifications to the operational guidelines
Further, following up on the suggestions received in the post budget consultations held by the Finance Minister on 25th February 2022 with the travel, tourism and hospitality sector and the civil aviation sector delegation led by the Minister of Civil Aviation, NCGTC also issued modifications to the operational guidelines for ECLGS 3.0.
Coverage of new borrowers
Keeping this in view, the coverage, scope and extent of benefits under ECLGS 3.0, pertaining to hospitality, travel, tourism and civil aviation sectors has been expanded. New borrowers in the sectors covered under ECLGS 3.0, who have borrowed after 31.3.2021 and up to 31.1.2022 will also now be eligible to avail of emergency credit facilities under ECLGS 3.0. The extent of emergency credit facilities that may be availed of under ECLGS 3.0, has been increased for eligible borrowers in all sectors covered under ECLGS 3.0. Eligible borrowers in all such sectors are now permitted to avail up to 50% of their highest fund based credit outstanding on any of three reference dates like 29.2.2020, 31.3.2021 and 31.1.2022, as against the earlier limit of 40% of the higher of their fund-based outstanding on either of two reference dates like 29.2.2020 and 31.3.2021. This is subject to the existing maximum of Rs. 200 crore per borrower.
Non-fund based emergency credit facilities
Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, eligible borrowers in the civil aviation sector are now permitted to avail of non-fund based emergency credit facilities as well under ECLGS 3.0. As against the earlier limit of availing up to 40% of the higher of their fund-based outstanding as on either of two reference dates, subject to a maximum of Rs. 200 crore per borrower, they can now avail of up to 50% of their highest total fund and non-fund based credit outstanding on any of the three reference dates referred to above, subject to a maximum of Rs. 400 crore per borrower.
Individuals & proprietary can also avail facilities
Further, to lower their cost of accessing non-fund-based credit, bank guarantees, letters of credit and other non-fund based facilities sanctioned under ECLGS 3.0, will be issued without any cash margin and subject to a cap of 0.5% per annum on the fee/commission. Individuals and proprietary concerns in the sectors covered under ECLGS 3.0 can also now avail of emergency credit facilities.
Enabling businesses in contact-intensive sectors
The modifications introduced are aimed at enabling businesses in these contact-intensive sectors to get further support through enhanced coverage and collateral-free liquidity on capped interest rates/fees. As on 25.3.2022, loans sanctioned under ECLGS crossed Rs. 3.19 lakh crore, and about 95% of the guarantees issued were for loans sanctioned to micro, small and medium enterprises. Emergency Credit Line Guarantee Scheme (ECLGS) is under the operational domain of the Ministry of Finance, Department of Financial Services (DFS).
Eligibility criteria for availing credit under ECLGS
For ECLGS 1.0, MSME units, business enterprises, Mudra borrower and individual loans for business purpose having loan outstanding upto Rs.50 crore and days past due upto 60 days as on 29.02.2020. For ECLGS 2.0, borrower belonging to 26 stressed sectors identified by Kamath Committee & Healthcare sector having loan outstanding above Rs.50 crore and upto Rs.500 crore and days past due upto 60 days as on 29.02.2020. For ECLGS 3.0 borrower belonging to hospitality, travel & tourism, leisure & sporting and civil aviation sector having days past upto 60 days as on 29.02.2020. For ECLGS 4.0 existing hospitals/nursing homes/clinics/medical colleges/units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. having credit facility with a lending institution with days past due upto 90 days as on March 31, 2021.
Objective of the scheme
The scheme has been designed to support existing borrowers meet the liquidity crisis due to Covid-19 pandemic. Ministry of MSME has launched Credit Guarantee Scheme for Subordinate Debt (CGSSD) to extend financial assistance to stressed MSMEs including NPA accounts. The credit needs of the first time bowers belonging to the Micro and Small Enterprises are catered to by the Credit Guarantee Scheme for Micro and Small Enterprises.