Home Airline News The government modifies the credit limit for the civil aviation sector

The government modifies the credit limit for the civil aviation sector

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The credit limit under this scheme has been increased to ₹1,500 crore from ₹400 crore to help the Covid-hit sector overcome liquidity crunch. The Ministry of Finance has expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) to increase the maximum credit under the scheme. The credit limit under the scheme has been increased to ₹1,500 crore from ₹400 crore to help the Covid-hit sector overcome liquidity crunch. The Department of Financial Services (DFS) on Tuesday amended the ECLGS to increase the maximum loan eligibility for airlines, an official statement said on Wednesday.

Under the amended ECLGS 3.0, the airline would be entitled to “100 percent of its outstanding or unfunded borrowing as on the reference date or ₹1,500 crore, whichever is lower; and out of the above ₹500 crore is assessed on the basis of owners’ own contribution.” All other terms and conditions prescribed in the operational guidelines of ECLGS on August 30, 2022 would be applicable as they are, the company said.

The arrangements put in place aim to provide the necessary unsecured liquidity at reasonable interest rates to address their current cash flow problems.

In March this year, the Emergency Credit Line Guarantee Scheme (ECLGS) was extended beyond March 2022 to March 2023 to implement the announcement made by Finance Minister Nirmala Sitharaman in the Union Budget 2022-23.

Due to the high share of non-fund loans in the total credit in the civil aviation sector, eligible borrowers have been allowed to avail up to 50 per cent of their highest total funds and outstanding non-fund loans, subject to a maximum of ₹400 crore per borrower, it said.

ECLGS was announced in May 2020 after the outbreak of Covid-19 to help various sectors, especially the MSME segment, to get credit at a concessional rate of 7 percent.

After the announcement, the scheme was modified several times depending on the demand of various industries. In addition, the deadline of the scheme has been extended several times to support various sectors of the economy that have been hit hard by the outbreak of the pandemic.

On 17 August, the Union Government approved an increase in the ECLGS limit of ₹50,000 crore to ₹5 crore. The additional amount is intended exclusively for businesses in the hospitality and related industries, including the aviation industry.

Loans worth around ₹ 3.67 crore have been sanctioned under ECLGS till 5 August 2022.

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