The Union Cabinet headed by Prime Minister Narendra Modi on Wednesday approved an additional infusion of Rs 50,000 crore under the Emergency Credit Line Guarantee Scheme (ECLGS) to ensure low-cost credit flow to hospitality and related segments hit hard by the COVID-19 pandemic.
What Is Emergency Credit Line Guarantee Scheme (ECLGS)
The ECLGS was announced in May 2020 in wake of the outbreak of COVID-19 to help various sectors, especially in the MSME segment, to get credit at a concessional rate of 7 per cent. Loans of about Rs 3.67 lakh crore have been sanctioned under ECLGS till August 5, 2022. The loans under ECLGS provide a 100 per cent guarantee to lending institutions in respect of the credit facility extended by them under the scheme to eligible borrowers.
In Budget 2022-23, Finance Minister Nirmala Sitharaman announced extending the validity of ECLGS till March 2023 and an increase in the limit of guaranteed cover by Rs 50,000 crore.
The additional amount of Rs 50,000 crore would be made applicable to enterprises in hospitality and related sectors till the validity of the scheme (March 31, 2023).
The Cabinet on Wednesday approved the enhancement in the limit of ECLGS by Rs 50,000 crore from Rs 4.5 lakh crore to Rs 5 lakh crore, with the additional amount being earmarked exclusively for enterprises in hospitality and related sectors, Information and Broadcasting Minister Anurag Singh Thakur said.
The increase was done on account of the severe disruptions suffered by hospitality and related enterprises due to the pandemic.
The enhancement is expected to provide much-needed relief to enterprises in these sectors by incentivizing lending institutions to provide additional credit of up to Rs 50,000 crore at a low cost, an official statement said.
The statement further said the ongoing pandemic has adversely impacted contact-intensive sectors, especially the hospitality and related segments, more severely.
"While other sectors were back faster on the path of recovery, demand continued to be subdued for these sectors (hospitality and related activities) for a longer period, suggesting the need for suitable interventions for their sustenance and recovery," the statement said.
Given their high employment intensity and direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery, it added.
This additional guarantee cover is expected to support the recovery of these sectors, the release said.
Hotel and restaurant association praised the government for the move and said that the government's approval for an additional Rs 50,000 crore under ECLGS for hospitality and related sectors will help businesses buy some more time to continue their operations, Federation of Hotel & Restaurant Associations of India said on Wednesday.
"The additional line of credit was much needed by the hospitality sector which is still grappling with massive debts and is simultaneously trying to keep business running," Federation of Hotel & Restaurant Associations of India (FHRAI) Vice President Gurbaxish Singh Kohli said in a statement.
(With PTI inputs)