The department of financial services said the facility would be available to 26 stressed sectors identified by a committee headed by former ICICI Bank chief K V Kamath. The list includes everything from healthcare, aviation and corporate retail outlets to power, cement, construction and textiles.
So borrowers from these sectors with outstanding loans of Rs 50-500 crore can avail of the special facility.
The amendment to the Rs 3 lakh crore ECLGS was announced as more cities went under a fresh lockdown following a fresh wave of Covid-19 cases. Around 80% of the scheme is understood to have been utilized which leaves around Rs 60,000 crore worth of loans available under the scheme that was originally meant for micro, small and medium enterprises that were facing a liquidity crunch.
With MSME units not using up the entire limit, the government first extended it to professionals before opening it to the hospitality, travel and tourism sectors, which have been hit hard by Covid-19.
Now, the scheme will be available to borrower accounts classified as Special Mention Account (SMA)-0 or SMA-1 as of February 29, 2020. These accounts are those where the overdue period is between 31 to 60 days. Initially, this facility was available to only those who were up to date with their payments.
The fresh funding, backed by a government guarantee, can help these borrowers tap loans from banks, and even clear their past dues, enabling businesses to come back on track as the demand situation normalises.
The government has said that the scheme would be available to loans sanctioned under the guaranteed emergency credit line during the period from May 23, 2020, to June 30, 2021, or till guarantees for an amount of Rs. 3 lakh crore are issued, whichever is earlier.
While some analysts have expressed fears that guaranteeing loans to stressed borrowers would only hide the stress, credit rating agencies say that this is not a credit negative for lenders.
“This cannot be termed as evergreening for several reasons. First, the earlier limits of 20% will not be enough to cover the loan repayment for the stress which may continue for a longer period. Second, since the loans are guaranteed by the government the banks are not increasing their credit exposure to the borrower. Third, most of the loans under the scheme have gone to borrowers with standard accounts and since the scheme has further headroom for new sanctions, that is being made available to borrowers in need,” said Anil Gupta, vice president, financial sector ratings ICRA.
According to Gupta, this is a pragmatic decision from the macroeconomic standpoint as it will help businesses and save jobs.