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Government increases credit limit for airline companies under ECLGS

SpiceJet and Go First, two cash-strapped airlines, will be able to get more no-collateral loans thanks to the adjustment.

October 06, 2022 8:01 IST | India Infoline News Service

In order to increase the maximum loan amount that airlines are eligible for under ECLGS 3.0, the government has broadened the scope of the Emergency Credit Line Guarantee Scheme (ECLGS).

SpiceJet and Go First, two cash-strapped airlines, will be able to get more no-collateral loans thanks to the adjustment.

The civil aviation ministry has pushed to increase the loan ceiling provided to Indian airlines under the ECLGS scheme after becoming concerned about their precarious financial situation.

The plan, which was unveiled in 2020, is intended to provide government-guaranteed loans without collateral in order to lessen the financial hardship that Covid is causing on firms.

According to a statement from the Ministry of Finance, "the amendments adopted are intended to supply required collateral-free funding at fair interest rates to tide over their current cash flow issues."

Under the program, SpiceJet has received a guaranteed sum of Rs352 crore, whereas Wadia-owned Go First has raised Rs25.65 crore.

In a letter to the finance ministry earlier this month, Rajiv Bansal, the secretary for civil aviation, requested that airlines be permitted to use additional debt under the program up to 100% of their existing credit, subject to a maximum of Rs1,500 crore.

The Centre updated the program in March of this year to allow the cash-strapped aviation sector to take advantage of 50% of their outstanding credit, calculated as the sum of their greatest total fund and non-fund-based credit outstanding, subject to a maximum of Rs400 crore per borrower.

Bansal cited the significant increase in jet fuel prices and the depreciation of the rupee versus the dollar as reasons why an expanded credit line is critical for airlines.

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