Govt weighs extension of emergency credit scheme

The government is examining a proposal to increase the validity of the Emergency Credit Line Guarantee Scheme (ECLGS), which is now set to expire in March.

The scheme offers government guarantees for up to ₹4.5 lakh crore of loans, and banks have so far sanctioned about ₹2.9 lakh crore under it. The government may expand the validity of the scheme by up to a year and the overall loan cap by 10%, said a finance ministry official.

The scheme was launched after the national lockdown during the first Covid wave to provide support to MSMEs and has since been expanded to cover other sectors such as aviation. As of now, about 95% of the guarantees issued are for loans sanctioned to MSMEs.


"We are examining it and an announcement for extension may be made in the upcoming Budget," the official said. The government has received a representation from the Indian Banks' Association (IBA) seeking an extension and additional funding support, the official said.

In September last year, the government extended the validity of the scheme till March 2022 or till guarantees for the entire ₹4.5 lakh crore were issued. Disbursement can be made till June 2022, which was earlier March.

"Another year-long extension may come through," said the official, noting that deliberations were ongoing.

The IBA, in its letter to the finance ministry last week, has argued that with the effects of the pandemic on economic activity continuing, a need was felt for continuing the support by government for one more year, up to March 2023.

"This will help banks to continue their support to the sectors affected by the pandemic and ensure availability of liquidity support to the affected MSMEs," it said in the letter, adding that economic revival which had begun already would establish firmly resulting in copious cash flows to sustain the operations of MSMEs.