New Delhi, Jun 29 (KNN) In a bid to revive the economy, Union Finance Minister Nirmala Sitharaman has expanded the Emergency Credit Line Guarantee Scheme (ECLGS) by 50 per cent to Rs 4.5 lakh crore for the MSME sector facing liquidity crunch.

The ECLGS scheme was launched as part of Aatma Nirbhar Bharat Package in May, 2020 promising guarantees worth Rs. 3 lac crore.

The major industry body representing Micro, Small & Medium Enterprises (FISME) has welcomed the move.

“The additional funds being made available under ECLGS 4.0 can be quite useful to help MSMEs come out of the Covid induced recession and set-backs”, FISME President Dr. Animesh Saxena said.

The ECLGS has received a very warm response with Rs 2.73 lakh crore being sanctioned and Rs 2.10 lakh crore already disbursed under the scheme. Under the expanded scheme, the limit of admissible guarantee and loan amount is proposed to be increased above the existing level of 20 per cent of outstanding on each loan.

“The fact that around 1 crore 10 lac businesses have already availed of funds through ECLGS (1.0, 2.0 & 3.0), highlights the scheme has been demand driven and successful”, FISME noted.  

The new package also includes Rs 1.1 lakh crore loan guarantee scheme for COVID-affected sectors, including health sector, which includes guarantee cover for expansion or for new projects.

Last month, the finance ministry expanded the scope of the Rs 3 lakh crore ECLGS by including concessional loans to hospitals for setting up on-site oxygen generation plants. Besides, the validity of the scheme was extended by three months to September 30 and or till guarantees for an amount of Rs 3 lakh crore are issued.

The last date of disbursement under the scheme has been extended to December 31. Under the ECLGS 4.0, 100 per cent guarantee cover was given to loans up to Rs 2 crore to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

The interest rate on these loans has been capped at 7.5 per cent, which means the banks can offer loans less than this ceiling.

FISME has pointed out that while these additional funds would help MSMEs tide over the crisis, the demand in the markets remain subdued and the Government may need to create the spurt in demand through Tax cuts.