FM announces infusion of Rs 1.5 lakh crore into the ECLG scheme

ECLGS-1.0, 2.0, and 3.0 have resulted in credit disbursal of Rs 2.69 lakh crore to Rs 1.1 crore units by 12 public sector banks, 25 private sector banks and 31 non-banking financial companies, the FM said.
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Finance Minister Nirmala Sitharaman announced the infusion of an additional Rs 1.5 lakh crore into the Emergency Credit Line Guarantee (ECLG) scheme, which was introduced last year as part of the Rs 20 lakh crore Aatmanirbhar Bharat stimulus package.

The finance minister announced this development in a press conference in addition to a slew of other schemes which included ways to uplift the healthcare sector.

She said, "ECLGS-1.0, 2.0, and 3.0 have resulted in credit disbursal of Rs 2.69 lakh crore to Rs 1.1 crore units by 12 public sector banks, 25 private sector banks and 31 non-banking financial companies."

The limit of the admissible guarantee loan amount proposed is expected to be increased above the existing level of 20 percent of outstanding on each loan.

Additionally, the overall cap of the admissable guarantee will be raised from Rs 3 lakh crore to Rs 4.5 lakh crore, Sitharaman said.

She also emphasised that sector-wise needs will be finalised as per evolving needs.

In May 2020, Union Minister for MSME (micro, small, and medium enterprises) Nitin Gadkari warned that India’s MSME sector — which contributes a significant 37.54 percent to the country’s overall GDP — was on the verge of collapse.

Shutting of factories, disruption of supply chains, and decrease in sales of non-essential items due to the extended nationwide lockdown brought business activity to a halt and exacerbated the liquidity crunch in the MSME sector.

With MSMEs desperate for financial aid after a 20 to 30 percent decline in their revenues, Finance Minister Nirmala Sitharaman rolled out a slew of initiatives in May under the Rs 20 lakh crore Aatmanirbhar Bharat stimulus package.

The schemes were announced to make India self-reliant at a time when production processes and supply chains were disrupted.

Of the 15 schemes announced by the FM, six were for MSMEs. Three policies that stood out were the Rs 3 lakh crore collateral-free loan scheme, the Rs 20,000 crore subordinate debt for MSMEs, and the Rs 50,000 crore equity infusion through the Funds of Funds (FoF).

Edited by Saheli Sen Gupta

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