Centre mulling an extension of emergency credit line guarantee scheme: Sources

The government is assessing if the emergency credit line guarantee scheme (ECLGS) needs to be extended.

ECLGS has been a crucial lifeline for businesses struggling to stay afloat during the COVID-19 pandemic. The scheme was launched in May 2020 and has since been extended several times.

However, with the current extension set to expire on March 31, 2023, the government is now reviewing the scheme to assess its effectiveness and decide whether to continue or let it lapse.

ECLGS is a loan guarantee scheme that provides financial assistance to businesses in the Micro, Small, and Medium Enterprises (MSMEs) sector, as well as those in the aviation, tourism, and hospitality sectors. Under the scheme, eligible borrowers can avail of a loan of up to 20 percent of their total outstanding credit as of February 29, 2020. The government provides a guarantee to the lender to cover any default by the borrower.

In the 2022-23 Budget, the government extended the ECLGS till March 31, 2023. However, the National Institute of Bank Management (NIBM) has been tasked with submitting an assessment report on the scheme. This report will likely inform the government's decision on whether to continue the scheme beyond the current deadline.

The government is also seeking feedback on ECLGS from banks that have participated in the scheme. This feedback will help the government understand the challenges faced by lenders and borrowers and identify areas for improvement.

As of January 31, 2023, the total amount of guarantees provided under ECLGS stands at Rs 3.41 lakh crore, which is about 68 percent of the Rs 5 lakh crore scheme limit. This highlights the significant demand for the scheme and its importance in supporting businesses affected by the pandemic.

The government's review of the scheme is a positive step to assess its impact and identify any areas for improvement. With the deadline for the current extension fast approaching, it remains to be seen whether the scheme will continue beyond March 31, 2023.