Banks have room to lend Rs 45,000 crore more under ECLGC scheme: IBA CEO

As the government enhanced the scope of the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), banks on Sunday said they have sanctioned Rs 2.54 lakh crore and have room to disburse another Rs 45,000 crore under the plan.

To support the businesses affected by the second wave of Covid-19, the Finance Ministry on Sunday enhanced the scope of ECLGS, including providing concessional loans to hospitals/nursing homes for setting up on-site oxygen generation plants.

The validity of the scheme is extended by a further three months to September 30 or till guarantees for an amount of Rs 3 lakh crore are issued, the ministry said in a statement.

Read more: Banks begin process of restructuring of loans up to Rs 25 crore

“Of the total kitty (for ECLGS) available, Rs 2.54 lakh crore of loans have already been covered and there is a window available for roughly Rs 45,000 crore. Of the Rs 2.54 lakh crore, Rs 2.40 lakh crore has already been disbursed,” Indian Banks' Association Chief Executive Officer (CEO) Sunil Mehta told reporters after the ministry's announcement.

The ministry said, under the ECLGS 4.0, a 100 per cent guarantee cover to loans up to Rs 2 crore will be provided to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

The interest rate on these loans has been capped at 7.5 per cent.

"Borrowers who are eligible for restructuring as per the RBI guidelines of May 5, 2021, and had availed loans under ECLGS 1.0 of overall tenure of four years comprising of repayment of interest only during the first 12 months with repayment of principal and interest in 36 months thereafter will now be able to avail a tenure of five years for their ECLGS loan i.e. repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter," the ministry said.

Also, the new scheme has made a provision of additional ECLGS assistance of up to 10 per cent of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0, in tandem with restructuring as per the RBI guidelines of May 5, 2021.

The government has also removed the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0, subject to maximum additional ECLGS assistance to each borrower being limited to 40 per cent or Rs 200 crore, whichever is lower.

Loans to the civil aviation sector were also made eligible under ECLGS 3.0, the ministry said.

“We all are aware of the scenario which emerged post resurgence of Covid 2.0. It has actually led to a lot of disruption of economic activity.

“The most vulnerable among them, MSMEs, are in need of support, which has been extended in various forms, more so in the May 5 circular of Reserve Bank of India. Now, the government today announced the modification to the ECGL scheme,” State Bank of India Chairman Dinesh Khara said.

On ECLGS 4.0, Khara said his bank will be in a position to build a book size of about Rs 2,000 crore.

He said for the resolution framework 2.0, announced by the RBI on May 5, all public sector banks have come out with a formulated templated approach for restructuring of loans to individuals, small businesses, MSMEs up to Rs 25 crore.

“The idea behind this is that those who are involved in the implementation of the resolution framework, they should not have any hardship in terms of any implementation,” Khara added.

When asked about the size of the restructuring pool banks are expecting this time, IBA Chairman and Union Bank of India's Managing Director and Chief Executive Officer Rajkiran Rai G said it was too early to put a number for potential recasts, as banks are only sending messages to eligible borrowers.

“Last time also we saw that the number of customers opting for this (restructuring) was not that high. So, we need to get some feedback and it is difficult to crystallise a number at this point in time,” Rai said.

Khara said during the previous restructuring scheme, SBI had about 8.5 lakh SME customers who were eligible for restructuring but only 60,000 borrowers availed it.