The Union Cabinet approved the Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS) on Wednesday, authorising funding up to Rs 50,000 crore to provide financial guarantee coverage for brownfield expansion and greenfield health and medical infrastructure projects. The scheme was approved in response to the disruptions caused by COVID-19’s second wave, particularly in the healthcare sector. Additionally, the Cabinet has approved the establishment of a scheme for other sectors and lenders, including those involved in improving healthcare.
According to an official release, specific modalities would be finalised in due course based on the evolving situation.
Additionally, the Cabinet approved an additional Rs 1,50,000 crore in funding under the Emergency Credit Line Guarantee Scheme (ECLGS).
ECLGS is a perpetual scheme. It will apply to all eligible loans sanctioned under the Guaranteed Emergency Credit Line (GECL) until September 30 or until a total of Rs 4.50 lakh crore is sanctioned, whichever occurs first.
The government has expanded the scheme’s scope in response to the disruptions caused by the second wave of the COVID 19 pandemic to businesses across the economy.
The enhancement is expected to provide much-needed relief to various sectors of the economy by incentivizing lending institutions to extend additional credit of up to Rs 1.5 lakh crore at low interest rates to assist enterprises in meeting their operational liabilities and continuing their businesses.
Apart from assisting MSMEs in remaining operational during this unprecedented period, the scheme is expected to have a positive effect on the economy and aid in its revival.
LGSCAS would apply to all eligible loans sanctioned through March 31, 2022, or until a total of Rs 50,000 crore is sanctioned, whichever occurs first.
According to the release, LGSCAS was developed in response to an exceptional situation in which the country found itself due to a lack of adequate health infrastructure, including medical oxygen in several hospitals during the second wave of COVID-19.
The approved scheme is expected to assist the country in strengthening its critical healthcare infrastructure while also creating additional job opportunities. LGSCAS’ primary objective is to mitigate credit risk (primarily construction risk) and to facilitate bank credit at lower interest rates.
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