New Delhi, May 23 (KNN) The Indian government is exploring the introduction of an expanded version of the Emergency Credit Line Guarantee Scheme (ECLGS) as part of efforts to strengthen manufacturing capabilities and enhance export competitiveness amid global economic uncertainties.
The proposal represents a revival of the pandemic-era credit support mechanism, which concluded in March 2023.
The initiative forms part of a comprehensive strategy to improve financing access for manufacturers, particularly those operating within the framework of the Atmanirbhar Bharat initiative, four sources familiar with the matter told Mint.
The expanded scheme would specifically target credit-constrained sectors while supporting both large-scale manufacturers and micro, small, and medium enterprises (MSMEs) facing funding challenges in the current economic environment.
The proposed framework includes enhanced credit flow through the collateral-free Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which would provide customised lending solutions for units approved under the production-linked incentive (PLI) scheme.
Additionally, the plan envisions expanded cluster-based financing to support emerging manufacturing hubs across the country.
A government source indicated that the revived scheme would focus on capital-intensive and export-oriented sectors that remain underserved by traditional lending mechanisms.
The modified ECLGS would offer preferential interest rates to stimulate manufacturing in electronics, medical devices, and defense production, all of which fall under the PLI framework.
The original Emergency Credit Line Guarantee Scheme, launched in May 2020 as part of the government’s pandemic response package, was designed to help businesses meet operational obligations and resume activities disrupted by COVID-19.
By its conclusion on March 31, 2023, the scheme had issued approximately 12 million guarantees worth Rs 3.65 trillion.
MSMEs accounted for 11 million of these guarantees, totaling Rs 2.41 trillion.
Data from a State Bank of India report published in January 2023 revealed that the scheme preserved approximately 1.46 million MSME accounts, with 98.3 percent belonging to micro and small enterprises.
The intervention proved particularly significant for preventing widespread business closures during the economic disruption.
Industry representatives have highlighted persistent financing gaps that the proposed scheme aims to address.
Despite the scheme’s coverage extending up to Rs 5 crore, practical lending limits remain constrained as banks typically require collateral for amounts exceeding Rs 1 crore.
The new measures under consideration would adopt a sector-specific approach rather than implementing uniform policies across all industries.
Government sources indicated that the targeted support would prioritise export-linked sectors and PLI scheme participants, which are positioned to deliver accelerated growth and improved returns with appropriate funding support.
(KNN Bureau)
