New Delhi: PHD Chamber of Commerce and Industry has recommended that the government also extend the Emergency Credit Line Guarantee Scheme (ECLGS) scheme until March 31st, 2022, while praising the RBI's initiatives for Micro, Small, and Medium Enterprises (MSMEs) impacted by COVID.
In a statement on Wednesday (May 5th), Sanjay Aggarwal, President, PHD Chamber, said, ''Extend ECLGS scheme to 31st March 2022 with an increase in the amount from Rs 3 lakh crore to Rs 6 lakh Crore along with an increase in the limit of ECLGS credit from 20 to 40 percent of the total of the fund and non-fund limit availed by the company as of February 29th, 2020 for all the sectors.''
He said the calibrated, sequenced, and well-timed steps announced by RBI on Wednesday are highly encouraging because they will provide liquidity, lower capital costs, and mitigate the daunting impact of the second wave of pandemic COVID-19.
''These measures will support the small businesses, individual borrowers, and the healthcare system in the country,'' he added.
The availability of a Rs 50,000 crore on-tap liquidity window with a three-year tenor at repo rate until March 31st, 2022, is extremely encouraging, as it will aid in the expansion of COVID-related healthcare infrastructure and support a wide range of entities, including vaccine manufacturers, importers/suppliers of vaccines and priority medical devices, hospitals/dispensaries, pathology labs, and manufacturers and distributors of vaccines and priority medical devices.
He also stated that incentivizing banks for fast credit delivery by extending priority sector classification to such lending until March 31st, 2022, and giving banks the option to park money equal to COVID loan book with RBI at 40 basis points above reverse repo rate would go a long way in helping to build a state-of-the-art health infrastructure at this critical juncture.
''Announcement of targeted long-term repo operation for small finance banks of Rs 10,000 crore, which can be used for lending of up to Rs 10 lakh per borrower is a great calibrated step which will support small business units, micro and small industries, and other unorganized sector entities to tide over the impact of pandemic COVID-19,'' he asserted.
Allowing Small Finance Banks to count new lending to smaller Micro Finance Institutions with assets of up to Rs 500 crore for on-lending to individual borrowers as priority sector lending; allowing banks to deduct credit disbursed to new MSME borrowers from their net demand and time liabilities to calculate the cash reserve ratio until December 31st, 2021; and allowing banks to deduct credit disbursed to new MSME borrowers from their net demand and time liabilities to calculate the cash reserve ratio until December.
Individual borrowers, small businesses, and MSMEs, among others, would benefit from Resolution Framework 2.0's eligibility for regular borrowers; a one-time initiative to revisit working capital sanctioned limits in respect of small businesses and MSMEs restructured previously; and other highly appreciable steps, according to Aggarwal.
''The steps undertaken by RBI have potential to boost liquidity in the system, mitigate the impact of COVID-19 on vulnerable segments of borrowers and stabilize the macroeconomic environment in the country, going forward,'' he concluded.