#NewDelhi: In the run-up to the Union Budget session, banks have sought extension of the existing Emergency Credit Line Guarantee Scheme (ECLGS) of Rs 4.5 lakh crore for micro, small and medium enterprises (MSMEs) to offset the losses caused by the Covid overdose.
Small and medium businesses are expected to be further affected by the recent outbreak of the third wave of coronaviruses. With this in mind, the Indian Banks Association (IBA) has approached the Finance Ministry and demanded extension of the ECLGS project.
In May 2020, the central government launched the Emergency Credit Line Guarantee Scheme to provide financial assistance to the MSME sector affected by the Kovid supermarket. This scheme is then opened for other sectors. ECLGS initially allocated Rs 3 lakh crore for the project and later it was increased to Rs 4.5 lakh. The term of the scheme was extended till March 2022.
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“We have asked the government to extend the ECLGS scheme by one year as failure to provide financial assistance could lead to serious problems,” a person associated with the banking association’s application process told CNBC-TV18. In addition to extending the duration of the scheme, the IBA has asked the government to simplify the terms of the project.
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“We have asked the government to shed light on a number of issues,” he said. One, among the eligible borrowers who have taken loans under this scheme, the amount of credit will have to be increased by another 10 per cent as additional support. Two, SMA-2 (Special Mention Account) borrowers also have to qualify for this scheme as the situation is not under their control. All SSMEs have to qualify for this scheme. ”
According to a senior executive of the Indian Banks Association, the government has so far spent only Rs 3.10 lakh crore out of the Rs 4.5 lakh crore allocated for the ECLGS project. The remaining amount is sufficient to meet the credit requirements of the MSME sector. There is no need to make additional allocations for the scheme. Only the extension of the scheme has been demanded.
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