More cash on the table for hospitality, small firms

Businesses seeking cash in the wake of the third wave of the pandemic have received fresh support through the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) and the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).

ECLGS, which has already provided support to 1. 3 crore small businesses, has been extended by one year to March 2023. Also, the size of the scheme has been increased by Rs 50,000 crore to Rs 5 lakh crore with the additional amount earmarked for hospitality and related sectors. The CGTMSE scheme is also being revamped with an infusion of funds to facilitate Rs 2 lakh crore of loans for micro and small enterprises and to expand employment opportunities.

According to bankers, the proposal will help contact-intensive businesses — particularly the travel, hospitality and other service sectors — who have managed to survive the first two waves but need support now. Those who have already availed relief under the scheme, however, cannot get a second round of relief as this would require a special dispensation from the RBI.

“ECLGS is one of the most successful interventions and it has helped many borrowers and has been instrumental in keeping the stress low in the banking system. Extending it further is a good move,” said Rajkiran Rai, chairman, Union Bank of India.

The scheme benefits lenders as they can lend up to 20% of the borrower’s credit limit, which will be guaranteed by the government. For the borrower, the advantage is that the interest rate is very low and there is a two-year moratorium, which in the short term has all the advantages of equity.

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