Cabinet approves enhancement in corpus of ECLGS

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi has approved the enhancement in the limit of Emergency Credit Line Guarantee Scheme (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.

Due to the tremendous disruptions that the COVID-19 epidemic has produced for the hospitality industry and related businesses, there has been an upsurge.

Implementation schedule:

ECLGS is a running programme. Until the scheme’s expiration on 31.3.2023, the additional sum of Rs. 50,000 crore would be available to businesses in the hospitality and associated sectors.

Impact:

The government has expressly set up Rs. 50,000 crore for businesses in the hospitality and associated sectors through the ECLGS programme, which is already in existence due to the COVID 19 pandemic’s effects on these industries. By encouraging lending institutions to offer additional credit of up to Rs. 50,000 crore at low cost, the upgrade is anticipated to give firms in these sectors the much-needed assistance they need to satisfy their operating obligations and carry on with their operations.

Loans of about Rs. 3.67 Lakh crore have been sanctioned under ECLGS till 5.8.2022.

Background:

Contact-intensive industries, particularly those in the hospitality and associated industries, have been negatively impacted by the current pandemic. While other industries returned to growth more quickly, the demand for certain industries remained muted for a longer length of time, indicating the need for appropriate actions to ensure their survival and revival. Their resuscitation is also required to support the recovery of the entire economy due to their high employment intensity and their connections, both direct and indirect, with other sectors.

Recognizing this, it was announced in the Union Budget 2022–23 to extend the ECLGS‘s validity until March 2023 and increase its guaranteed cover limit by Rs. 50,000 crore to a total of Rs. 5 lakh core, with the extra money being set aside specifically for businesses in the hospitality industry and closely related industries.

High immunisation rates, the gradual easing of limitations, and the general economic recovery have created the right conditions for continued demand development in these industries as well. These sectors’ recovery is anticipated to be assisted by the extra guarantee cover. This extra guarantee coverage is anticipated to aid in these sectors’ revival.