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Loan scheme to be notified soon

General Studies – 3

Topics covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment


Context: Delay in actualizing a loan guarantee scheme announced by the government in the aftermath of second wave of the pandemic in India

Key points related to this

  •       Background:
  1.     A Rs 60,000 crore loan guarantee scheme was announced by the government hit hardest by second wave of the Covid-19
  2.     This credit support was part of the Rupees 1.1 Lakh crore loan guarantee scheme for Covid-affected sectors
  3.     Rupees 50,000 crore in this was earmarked for healthcare projects in non-metro cities and was approved by the Union Cabinet
  4.     For other sectors which were badly hit due to the pandemic (Ex: Tourism), a Rupees 60,000 crore loan guarantee scheme was promised with the interest on such loans capped at 8.25% as opposed to prevalent rates of 10-11%
  •       Delay in actualizing the loan guarantee scheme is hurting the chances of survivability of the tourism sector which has been one of the worst affected sectors due to the pandemic
  •       Business have also highlighted how lenders have not been processing their applications for loan restricting under the existing Emergency Credit Line guarantee scheme

About ‘Emergency Credit Line guarantee scheme’

  •       It was launched by government of India as a special scheme in view of the pandemic
  •       The ECLGS aims to provide 100 percent guaranteed coverage to the banks, NBFCs and other lenders in order to enable them to extend emergency credit to businesses hit by the Covid-19 pandemic and struggling to meet their working capital requirements.
  •       In November 2020, Finance Minister Nirmala Sitharaman announced the launch of ECLGS 2.0 by extending the Rs 3 lakh crore scheme to support 26 stressed sectors identified by the Kamath Committee and the healthcare sector.
  •       These sectors included power, construction, iron and steel manufacturing, roads, real estate, textiles, chemicals, consumer durables, non-ferrous metals, pharma manufacturing, logistics, gems and jewellery, cement, auto components, hotels-restaurants-tourism, mining, plastic product manufacturing, automobile manufacturing, auto dealerships, aviation, sugar, ports and port services, shipping, building materials, and corporate retail outlets.