The Union Cabinet, chaired by prime minister Narendra Modi, on Wednesday approved the enhancement in the limit of Emergency Credit Line Guarantee Scheme (ECLGS) by ₹50,000 crore from ₹4.5 lakh crore to ₹5 lakh crore, with the additional amount being earmarked exclusively for enterprises in hospitality and related sectors.

The increase has been done on account of the severe disruptions caused by the Covid-19 pandemic on hospitality and related enterprises.

The additional amount of ₹50,000 crore would be made applicable to enterprises in the hospitality and related sectors till March 31, 2023.

The enhancement is expected to provide much needed relief to enterprises in these sectors by incentivising lending institutions to provide additional credit of up to ₹50,000 crore at low cost, thereby enabling these business enterprises to meet their operational liabilities and continue their businesses.

In her Budget speech, finance minister Nirmala Sitharaman had announced that the Emergency Credit Guarantee Line Scheme for the hospitality sector will be extended to March 2023. “The hospitality and related services, especially those by micro and small enterprises, are yet to regain their pre-pandemic level of business. Considering these aspects, the ECLGS will be extended up to March 2023 and its guarantee cover will be expanded by ₹50,000 crore to total cover of ₹5 lakh crore,” she had said.

Till August 5, loans of about ₹3.67 lakh crore have been sanctioned under ECLGS.

The ongoing pandemic has adversely impacted contact-intensive sectors, especially the hospitality and related sectors more severely. While other sectors were back faster on the path of recovery, demand continued to be subdued for these sectors for a longer period, suggesting the need for suitable interventions for their sustenance and recovery.

“Given their high employment intensity and their direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery. Recognising this, in Union Budget 2022-23, it was announced to extend validity of ECLGS upto March, 2023 and increase in the limit of guaranteed cover of ECLGS by ₹50,000 crore to total cover of ₹5 lakh crore, with the additional amount being earmarked exclusively for the enterprises in hospitality and related sectors,” the Ministry of Finance says in a statement.

“With high immunisation levels, progressive roll-back of restrictions and overall economic recovery, conditions are in place for sustained growth in demand for these sectors as well. This additional guarantee cover is expected to support the recovery of these sectors as well. This additional guarantee cover is expected to support the recovery of these sectors,” the ministry adds.

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