An association of non-banking economic firms (NBFCs) has written to finance minister (FM) Nirmala Sitharaman, looking for the inclusion of education as a sector beneath the ambit of the credit assure scheme for modest enterprises.
The Finance Industry Development Council (FIDC) told the government, in a letter, that loans to educational institutions across the nation exceed Rs 10,000 crore and, in the absence of assistance, lenders in the space would be forced to create down their portfolios.
Seeking a virtual meeting with the FM and ministry officials, FIDC mentioned in the letter, “We believe that inclusion of Education sector under ECLGS 3.0 will not only provide regular source of funding to Educational Institutions enabling them to cope up with short-term liquidity problem arising out of closure of schools/colleges etc. but also the cash flows would be more aligned to the elongated repayment term.” Simultaneously, lending institutions would be capable to cover the threat of their educational infra loan portfolio and it would provide an enhanced small business chance, the letter added.
Assuming an typical tuition charge of `1,000 per month and an typical 350 students per college, about `12,250 crore per month of charges really should have been received by schools. However, due to sudden lockdowns and the continuing effect of the pandemic, the liquidity position of schools and colleges and, consequently, of the lenders in the education space has been seriously impacted, FIDC mentioned.
The original emergency credit line assure scheme (ECLGS 1.), announced in May 2020, sought to incentivise further funding to eligible micro, modest and medium enterprises (MSME) borrowers by guaranteeing one hundred% sovereign assure coverage.
In November 2020, the ministry announced the extension of ECLGS 1. till March 31, 2021, and the introduction of ECLGS 2., which brought 26 stressed sectors identified by the Kamath committee beneath the ambit of sovereign assure. Both the schemes are now in impact till June 30, 2021. ECLGS 3., notified on March 31, 2021, covers enterprises and MSMEs in the hospitality, travel & tourism, and leisure & sporting sectors.
The scheme enables funding to these sectors up to 40% of total credit outstanding as on February 29, 2020, to the extent of Rs 500 crore.
“It is pertinent to note that Education Sector has not been included in the identified 26 stressed sectors whereas there has been serious impact of COVID-19 on the education sector as well including closure of Schools/Colleges etc. resulting in a negative social and economic impact,” FIDC mentioned.