Credit lifeline for Covid-hit sectors gets a ₹50,000 crore push

The Cabinet on Wednesday approved a ₹50,000-crore increase in the limit for the Emergency Credit Line Guarantee Scheme (ECLGS) to ensure low-cost credit to hospitality and related segments hit hard by the Covid-19 pandemic.

It also earmarked ₹34,856 crore towards the farm sector interest subvention scheme to help banks provide short-term agriculture loans of up to ₹3 lakh at a concessional rate of 7%, restoring the support on such credit to 1.5% for all financial institutions. The maximum limit for the ECLGS has been raised to ₹5 lakh crore, from ₹4.5 lakh crore.

The additional amount is earmarked exclusively for enterprises in hospitality and related sectors, information and broadcasting minister Anurag Singh Thakur told the media in a briefing on the Cabinet's decisions.


"While other sectors were back faster on the path of recovery, demand continued to be subdued for these sectors (hospitality and related activities) for longer, suggesting the need for suitable interventions for their sustenance and recovery," said a government statement.

Eye on Overall Recovery
Given their high employment intensity and direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery, it added.

ECLGS was announced in May 2020 following the outbreak of Covid-19 to ensure various sectors, especially in the MSME segment, easy access to credit. Loans of about Rs 3.67 lakh crore have been sanctioned under ECLGS till August 5. In the FY23 budget, finance minister Nirmala Sitharaman extended the scheme until March 2023 while increasing the limit by ₹50,000 crore.

Interest Subvention

The interest subvention of 1.5% will be provided to lending institutions during FY23 to FY25 for short-term farm loans of up to ₹3 lakh to the farmers.

Thakur said the government's support to banks for the interest subvention scheme was stopped in May 2020 as lenders were themselves able to provide short-term agriculture loans at 7%. However, with the Reserve Bank of India (RBI) increasing the repo rate or short-term lending rate thrice by a cumulative 140 basis points in recent months, it became necessary to compensate banks so they can continue providing the loans at 7%.

Under the scheme, an additional 3% subvention - prompt repayment incentive - is also given to the farmers for timely repayment.

Thakur said the government has not let fertiliser prices rise despite the increase globally. Fertiliser subsidies in the current year are likely to be more than ₹2 lakh crore. In Budget 2022-23, the fertiliser subsidy was estimated at ₹1.05 lakh crore, less than the revised estimate of ₹1.62 lakh crore for FY22.