The Emergency Credit Line Guarantee Scheme (ECLGS), which ends on March 31, 2022, could be extended in the next financial year as several small firms, particularly in the services sector, still need such liquidity support

The MSME credit facility scheme has been successful in providing liquidity support to over 10 million enterprises. (ANI)

The MSME credit facility scheme has been successful in providing liquidity support to over 10 million enterprises. (ANI)

NEW DELHI: The government could extend its ₹4.5 lakh crore sovereign-guaranteed credit facility for small businesses to the next fiscal year as the pandemic is not yet over and the scheme has been successful in providing liquidity support to over 10 million enterprises, protecting about 54.5 million jobs, people aware of the development said.

The Emergency Credit Line Guarantee Scheme (ECLGS), which ends on March 31, 2022, could be extended in the next financial year as several small firms, particularly in the services sector, still need such liquidity support in the wake of new Covid-19 variants, two persons aware of the development said requesting anonymity.

“The extension of ECLGS with certain modifications is under consideration and an announcement to this effect is possible in the budget,” one of them said, adding that a corpus of about ₹1.6 lakh crore is still available under the scheme.

ECLGS is one of the key components of the ₹20 lakh crore economic stimulus package under the Atmanirbhar Bharat Abhiyan launched in mid-May last year that offers additional working capital finance in the form of a term loan to MSMEs and professionals. Initially, its corpus was ₹3 lakh crore, which was raised to ₹4.5 lakh crore in June this year after the second Covid wave when finance minister Nirmala Sitharaman announced the fourth stimulus package worth ₹6.29 lakh crore.

A second person said that under ECLGS, loans worth over ₹2.82 lakh crore have been sanctioned to about 11.5 million borrowers so far, and ₹2.28 lakh crore has already been disbursed, benefiting 9.52 million units. “The scheme has been able to provide much needed liquidity support to pandemic-hit small units. Although the economy has bounced back, several such firms, particularly those in services sector, still need such credit support as the potential threat of new variants cannot be ruled out,” he said.

The Covid-19 outbreak last year, and the consequent 68-day nationwide lockdown, had a devastating impact on the economy. India’s gross domestic product (GDP) contracted in the first two quarters of 2020-21 — 24.4% in Q1 and 7.4% in Q2. Thereafter, the economy saw a V-shaped recovery on the back of the ₹20 lakh crore stimulus package and several policy reforms announced since March 2020. The third quarter saw 0.5% growth, followed by 1.6% expansion in the fourth quarter ended March 31, 2021. The Indian economy started the current fiscal year with a record 20.1% expansion in Q1, and 8.4% in Q2 ended September 2021, signalling a strong revival in business activity.

PHD Chamber of Commerce and Industry (PHDCCI) president Pradeep Multani said ECLGS with a sovereign guarantee has been the “saviour of a large number of enterprises” facing challenges related to financial liquidity, demand crunch, debt repayments, and meeting their fixed expenses such as electricity, rent and wages. “While the overall pace of implementation of the ECLG scheme has been good… but as we understand from the available figures, out of ₹4.5 lakh crore, loans worth ₹2.90 lakh crore have been sanctioned so far. It is, therefore, desirable that the validity of the scheme should be extended,” he said.

Sachin Gaikwad, founder and CEO of fintech startup Build said although ECLGS helped small and medium enterprises its qualification criteria could have been “more relaxed to cover larger segment” such as ancillary units and vendors who are victims of the supply chain disruptions. He, however, said that the scheme “should continue for another year” to make up for the dent of past one-and-a-half years.

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