oppn parties ECLGS Amended To Allow Defaulters To Borrow

News Snippets

  • 2nd ODI: Rohit Sharma roars back to form with a scintillating ton as India beat England by 4 wickets in a high scoring match in Cuttack
  • Supreme Court will appoint an observer for the mayoral poll in Chandigarh
  • Government makes it compulsory for plastic carry bag makers to put a QR or barcode with their details on such bags
  • GBS outbreak in Pune leaves 73 ill with 14 on ventilator. GBS is a rare but treatable autoimmune disease
  • Madhya Pradesh government banned sale and consumption of liquor at 19 religious sites including Ujjain and Chitrakoot
  • Odisha emerges at the top in the fiscal health report of states while Haryana is at the bottom
  • JSW Steel net profit takes a massive hit of 70% in Q3
  • Tatas buy 60% stake in Pegatron, the contractor making iPhone's in India
  • Stocks return to negative zone - Sensex sheds 329 points to 76190 and Nifty loses 113 points to 23092
  • Bumrah, Jadeja and Yashasvi Jaiswal make the ICC Test team of the year even as no Indian found a place in the ODI squad
  • India take on England in the second T20 today at Chennai. They lead the 5-match series 1-0
  • Ravindra Jadeja excels in Ranji Trophy, takes 12 wickets in the match as Saurashtra beat Delhi by 10 wickets. All other Team India stars disappoint in the national tournament
  • Madhya Pradesh HC says collectors must not apply NSA "under political pressure and without application of mind"
  • Oxfam charged by CBI over violation of FCRA
  • Indian students in the US have started quitting part-time jobs (which are not legally allowed as per visa rules) over fears of deportation
Manipur Chief Minister Biren Singh resigns after meeting Home Minister Amit Shah and BJP chief J P Nadda /////// President's Rule likely in Manipur
oppn parties
ECLGS Amended To Allow Defaulters To Borrow

By Ashwini Agarwal
First publised on 2021-04-17 03:21:05

The government had announced a Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) as part of its Covid package to provide loans to stressed MSMEs. These loans were backed by government guarantee. When MSMEs did not avail the entire quantum of the scheme, it was first thrown open to professionals and then to other stressed sectors like hospitality and travel and tourism. But the scheme was only for those whose accounts did not show a payment default as on February 29, 2020. With just 80% offtake in the scheme till now, Rs. 60000 crore are still left unutilized. Hence, the government has amended the scheme as per the recommendations of the committee headed by ICICI Bank chief K V Kamath to provide loans even to big borrowers (Rs 50-500 crore) even if they had payment default of 31-60 days as on the cut-off date, or if they were classified as Special Mention Account (SMA)-0 or SMA-1. This facility will be provided to nearly 26 stressed sectors identified by the committee.

This is a good move on part of the government because even though there is a danger of the stress of the companies getting brushed under the carpet for the time being, the larger goal of providing relief to stressed sectors and companies to prevent job losses will be achieved. Since these new loans will be guaranteed by the government, banks will not be reluctant to fund these defaulters. But a close watch needs to be kept on these borrowers and the application of funds needs to be tracked too. Although the government has said they can use the new loans to repay the old debt, the health of these borrowers needs to be monitored closely to ensure that the new loans do not go bad. While it is good to bail out stressed sectors in order to maintain productions levels, prevent job losses and give them a chance to overcome the stress, the government should not suffer a loss.