The revision in ECLGS framework will also benefit MSMEs borrowers that availed of the 1.0 scheme
The revision in ECLGS framework will also benefit MSMEs borrowers that availed of the 1.0 scheme

Expanded ECLGS a lifeline for sectors hit by second Covid wave: Crisil

ANI | Updated: Jun 05, 2021 11:45 IST


Mumbai (Maharashtra) [India], June 5 (ANI): The expansion of Emergency Credit Line Guarantee Scheme (ECLGS) announced by the government will help companies in sectors like civil aviation, hotels and tour operators where demand has been severely affected by the intense second wave of Covid-19 pandemic, rating agency Crisil has said.
The scheme will also support build-up of healthcare infrastructure, mainly oxygen availability, in tier two and beyond cities besides the hinterland.

The scope of scheme first announced on May 13 last year has been continuously expanded. The latest version will be valid up to September 30 or till the unutilised amount of Rs three lakh crore is exhausted.
More sectors have been brought under the scheme's ambit, some eligibility criteria have been relaxed, and micro, small and medium enterprises (MSMEs) have been allowed to avail of loans for longer tenures.
The scheme has sanctioned Rs 2.54 lakh crore of loans under the previous three versions as of mid-May.

The revised scheme has included civil aviation sector -- airlines and airport operators -- and also eased the eligibility criteria for companies in the hospitality, travel and tourism, and leisure and sports sectors.
All these have been hit hard by the second wave. In the current quarter, these sectors are expected to see a demand contraction of over 30 per cent sequentially.
Moreover, except for airport operators, many companies in the other stipulated sectors of the scheme have high leverage which constrain their ability to withstand unexpected demand contraction.

Subodh Rai, Chief Ratings Officer at Crisil Ratings, said the civil aviation sector in particular has been severely dented by current embargo on international flights and very weak domestic demand.
Passenger traffic is expected to more than halve this quarter sequentially, he said. It will take at least two quarters for demand to recover to January to March 2021 levels.
"The move to include civil aviation in the scheme will provide the sector much-needed liquidity support amid materially constrained cash generation ability due to several localised lockdowns," said Rai.

Besides, under ECLGS 4.0, capacity enhancement of oxygen-generating plants will receive a boost with funding up to Rs two crore being made available at low interest rates capped at 7.5 per cent.
The loan will be for a maximum five years including six months of moratorium on principal repayment.
Mid-sized and small hospitals, especially in tier two and beyond cities besides the hinterland, are expected to be major beneficiaries because their borrowing capacity tends to be weaker due to relatively constrained credit profiles.
Moreover, banks and financial institutions will also be more inclined to lend to them because ECLGS borrowings are backed by sovereign guarantee, which mitigates the credit risk for the lending institution.

While the terms of the scheme are attractive, hospital companies will have to carefully evaluate spending, keeping in mind the sustainability of demand and overall viability of investments, said Crisil.

The revision in ECLGS framework will also benefit MSMEs borrowers that availed of the 1.0 scheme, provided they are eligible under the Reserve Bank of India's restructuring 2.0 framework.
Now the moratorium on principal repayment and overall loan tenure have both been extended by a year which will provide much-needed support to tide over ongoing volatility in the business environment. (ANI)

Loading...
iocl
iocl