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CIMSME Body to RBI's Shaktikanta Das: Extend ECLGS 1.0 to 5 years after moratorium

In May 2021, the Government extended the ECLGS 1.0 moratorium period from one to two years — in which MSMEs were only to reimburse interest. The repayment period was three years.

The government plans to create an ARC and AMC to take over and settle bad loans, as outlined in the Union's budget 21-22.

As of 29 February 2020, the Government had announced that borrowers covered under ECLGS 1.0 under the RBI guidelines could benefit by up to 10% of the outstanding loan.

In a letter to the Indian Reserve Bank Governor, Shaktikanta Das, the MSME Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) urged the Emergency Credit Line Guarantee Scheme (ECLGS) to extend the repayment period to five years from the 3 years after the moratorium. Last month, the government extended the ECLGS 1.0 moratorium period – during which MSMEs were only responsible for repaying interest – from one to two years, while the principal and interest repayment period were three years. Moreover, CIMSME also requested that, in place of limiting this to borrowers eligible for a loan restructuring in accordance with RBI guidelines from 5th May 2021, the extended repayment period be applicable to all MSMEs that have received loans under ECLGS 1.0.

"ECLGS covered the daily costs of MSMEs. The cost for production amid the pandemic increased due to increasing time spent on the procurement and transportation of raw materials into finished products. The costs were also increased due to the limited facilities. Further, work shortages and the end-use of ECLGS for fixed expenses, rather than working capital, have also affected profits for MSMEs. Therefore, in three years after the moratorium, MSMEs will not be able to generate enough cash to pay this loan," said the president of the CIMSME, Mukesh Mohan Gupta, representing over 1 lakh MSMEs.

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