Center increases airlines’ unsecured loan limit to overcome cash crisis

As airlines’ operating costs rise after an unprecedented rise in the price of jet fuel and a devaluation of the rupee against the dollar, the Center on Wednesday allowed them to avail more unsecured loans to overcome their debt problems. Treasury.

The credit limit granted to them has been increased under the government’s Emergency Line of Credit Guarantee (ECLGS) scheme which was launched during the Covid-19 pandemic.

Airlines have been allowed to avail of additional debt of up to 100% of their outstanding credit, subject to a cap of Rs 1,500 crore.

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The aviation industry is facing a shortage of funds after taking off after the pandemic. Banks have been cautious in lending to sectors that may have other problems servicing those loans. Since contract-intensive services such as airlines have not yet fully taken off, it has become difficult to obtain loans for these entities.

The problem has worsened for smaller airlines whose balance sheets are still under stress.

In March, the center amended the ECLGS to allow airlines to benefit from 50% of their outstanding credit up to a ceiling of Rs 400 crore per borrower. The same pattern was changed again on Wednesday, the finance ministry said.

“Recognizing that an efficient and strong civil aviation sector is vital to the economic development of the country, the Department of Financial Services (DFS) of the Ministry of Finance has amended the Emergency Line of Credit Guarantee Scheme (ECLGS ) to increase the maximum amount of loan eligibility for airlines under the ECLGS 3.0 to 100% of their loan based on funds or not outstanding at the benchmark dates or Rs. 1,500 crores, depending on the lower amount; and of the above, Rs 500 crore will be taken into account, based on the owners’ capital contribution,” the ministry said in a statement.

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