April 17, 2021 6:19:35 am
To provide relief to stressed companies, the Finance Ministry on Friday expanded the scope of a government-guaranteed credit facility to healthcare and stressed sector companies that have loan dues for up to 60 days (or SMA-1 accounts), as against 30 days earlier (SMA-0). This has been an industry demand as well, and expected to provide provide partial relief to stressed firms facing fresh uncertainty and business risks due to fresh lockdowns and restrictions being imposed by states.
“Scope of ECLGS 2.0 expanded! SMA-1 borrowers in the healthcare sector and 26 other high stress sectors (as identified by the Kamath Committee) are now eligible under ECLGS 2.0,” the Department of Financial Services said in a tweet. The Emergency Credit Line Guarantee Scheme (ECLGS) allows a company with loan outstanding above Rs 50 crore and below Rs 500 crore to access it to raise fresh credit without providing any additional collateral.
Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans. Companies from hospitality, travel & tourism, and leisure & sporting sectors are expected to benefit from the relaxation in the scheme. Hotels, restaurants, canteens, caterers, marriage halls, tour operators, as well as amusement parks and theatres can avail the facility.
Accounts that are classified as non-performing assets or where overdues have crossed 60 days (SMA-II) are not eligible.
Last November, the government launched a new version of the ECLGS to provide funding support to stressed sectors in the economy. Companies that had loan dues up to 30 days (Special Mention Accounts or SMA-0) as on February 29, 2020, were being provided additional credit of 20 per cent outstanding under the scheme, which will now be given to SMA-1 accounts as well.
This is within the Rs 3-lakh-crore loan sanction limit set under the scheme, but it could be raised depending on the demand. The stressed sectors, including construction, trade, hotels, and transport, contributed nearly 83.4 per cent to the contraction in the services sector in the April-June quarter of FY21.
A five-member expert committee headed by K V Kamath, former chairman of ICICI Bank, which was set up to recommend financial parameters required for a one-time loan restructuring window for corporate borrowers, had said in its report that companies in sectors such as retail trade, wholesale trade, roads, and textiles were facing stress. Sectors that have been under stress pre-Covid include non-banking financial companies, power, steel, real estate, and construction.
The Kamath committee noted that corporate sector debt worth Rs 15.52 lakh crore had come under stress after the pandemic hit India, while another Rs 22.20 lakh crore was already under stress by then. This effectively means Rs 37.72 lakh crore (72 per cent of the banking sector debt to industry) remains under stress. This is almost 37 per cent of the total non-food bank credit.
The tenor of the additional credit availed under the scheme will be five years, including one year of moratorium on principal repayment. Banks have sanctioned loans worth Rs 2.46 lakh crore to about 92 lakh accounts under the scheme as on February 28, 2021. The government has recently extended the ECLGS till June 2021, as against March 31, 2021 earlier.
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