Union cabinet approves loan guarantee program for sectors affected by pandemic

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NEW DELHI: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved the Covid-Affected Sectors Loan Guarantee Program (LGSCAS) allowing funding of up to Rs 50,000 crore to provide a financial guarantee for the expansion of brownfields and entirely new projects related to health and medical infrastructure. The move comes in the wake of disruption caused by the second wave of the pandemic that overwhelmed India’s healthcare system.

The Cabinet also approved the introduction of a program for other sectors / lenders, including those allied with better health care. The detailed modalities will be finalized in due course as the situation evolves. In addition, the Cabinet also approved additional funding of up to Rs.150,000 crore under the Emergency Line of Credit Guarantee Program (ECLGS).

The LGSCAS program will be applicable to all eligible loans sanctioned until March 2022, or until an amount of Rs50,000 crore is sanctioned, whichever comes first. The ECLGS is an ongoing program and will be applicable to all eligible loans sanctioned under the Guaranteed Emergency Credit Line (GECL) until September 2021, or until an amount of 4.5 trillion euros. rupees be sanctioned, whichever comes first, the government said.

“The LGSCAS was formulated as a specific response to an exceptional situation the country has experienced due to the lack of adequate health infrastructure in light of the second wave of Covid-19. The approved program is expected to help the country strengthen its -the necessary health infrastructure and the creation of more employment opportunities. The main objective of LGSCAS is to partially mitigate the credit risk (mainly the construction risk) and to facilitate bank lending at low rates. lower interest, ”the government said in a statement.

He added that the scope of ECGLS has been broadened. “The improvement is expected to provide much needed relief to various sectors of the economy by prompting lending institutions to provide additional credit of up to Rs1.5 lakh crore at low cost, thereby enabling businesses to cope with their operational obligations and to continue their activities, “the government said.

The second wave of covid has put enormous strain on India’s health infrastructure as well as livelihoods and businesses across many sectors. It clearly highlighted the need to strengthen public and private investments in the health sector.

The proposed LGSCAS program aims to strengthen medical infrastructure in the country, specifically targeting underserved areas. The program would provide a guarantee of 50% for brownfield projects and 75% for entirely new projects for loans sanctioned up to Rs 100 crore, set up in urban or rural areas other than eight metropolitan cities of Level 1. For ambitious districts, the guarantee coverage for brownfield expansion projects and new projects will be 75%, the government said.

The resurgence of covid infections in India in recent weeks and associated containment measures adopted at local / regional levels created new uncertainties and impacted the nascent economic recovery that was taking shape. “In this environment, the most vulnerable category of borrowers are individual borrowers, small businesses and MSMEs, for whom ECGLS, as a targeted policy response, was introduced by Gol,” the government said. .

“The design of ECGLS provides flexibility to respond quickly to emerging needs, as evidenced by the introduction of ECGLS 2.0, 3.0 and 4.0 as well as the changes announced on 05/30/2021, all of which were within the available range of 3 lakh crore, ”he said.

Currently, loans worth around Rs.2.6 trillion have been sanctioned under ECGLS.

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