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Taking into consideration the business disruption caused by surge in covid cases, the government has modified and expanded the scope of ECLGS scheme (for effective utilisation of the overall limit of Rs3trn guarantee cover). Providing an additional 10% facility to existing customers under ECLGS 1.0, increasing tenure (from 4 years to 5 years) and extending principal moratorium from 1 year to 2 years will partially help address the stress anticipated due to covid second wave disruption. This, over and above the earlier announced measures of reassessment of moratorium period and working capital refinancing under restructuring 1.0, is a welcome move. Not only the scope of ECLGS 3.0 scheme was widened by removing the cap (of Rs5bn outstanding), but civil aviation industry is now included to avail of the benefit.

Banks too have formulated a templated approach, outreach action plan and standardised processes for effective implementation of ECLGS schemes and resolution framework 2.0. Not only this, they have designed products for build-up of covid book under RBI guidelines including unsecured personal loans for covid treatment and business loans for healthcare facilities.

It is difficult to quantify the extent of benefit of the announced measures at this juncture, but expansion of ECLGS scope will lead to incremental benefit of 20-25%. Restructuring, though not extensively availed of during the first wave disruption as it was co-existing with moratorium, we believe the quantum of restructuring can be relatively higher under resolution framework 2.0.

* ECLGS scheme benefits extended and scope expanded

* ECLGS 1.0 – additional assistance up to 10% of outstanding as of 29th Feb’20 (over and above the 20% earlier). Maximum tenure has also been extended to 60 months (from 48) – repayment of interest only is required (principal moratorium) in the first 24 months (12 months earlier).

* ECLGS 3.0 – Ceiling of Rs5bn of total credit outstanding across all lending institutions has been removed; this is subject to additional maximum benefit to the extent of Rs2bn, or 40%, whichever is lower. Civil aviation is also specifically included as an eligible sector (benefit is up to Rs2bn per borrower).

* ECLGS 4.0 rolled out – 100% guarantee cover is to be provided on loans up to Rs20mn to hospitals, nursing homes, clinics, medical colleges, etc. for setting up onsite oxygen generation plants. Interest rates will be capped at 7.5%.

Validity of ECLGS scheme implementation has been extended up to 30th Sep’21, or till guarantee cover of Rs3trn is issued. Disbursements under the scheme are permitted up to 31st Dec’21.

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Till date, Rs2.44trn of loans have been disbursed by financial institutions under various ECLGS schemes with maximum benefit extended under ECLGS 1.0. Again, of the committed guarantee cover up to Rs3trn by the government, Rs550bn window is still unutilised. Widening the scope of the scheme will help utilise the window. However, there is no extension of the earlier announced initial government guarantee of Rs3trn, though the incremental benefit will be 20-25%. No amount has been disclosed by the finance ministry as to what can be the likely quantum availing the benefit from extended ECLGS, but banks expect to build a combined ECLGS 3.0 and ECLGS 4.0 portfolio of Rs20bn.

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