Emergency Credit Line Guarantee Scheme [ECLGS]

By : Neha Dhyani

Updated : May 9, 2022, 6:22

The Covid-19 pandemic hurt most business ventures. Many business enterprises, including Micro, Small, and Medium Enterprises (MSMEs), we're left in a financial lurch due to this unprecedented crisis. The Emergency Credit Line Guarantee Scheme [ECLGS] is a government-backed scheme that provides financial support to such businesses.

Let's explore the details of ECLGS.

What Is the Emergency Credit Line Guarantee Scheme [ECLGS]?

The Government of India launched the Emergency Credit Line Guarantee Scheme [ECLGS] as part of the Atma Nirbhar Bharat Package on 13 May 2020. This scheme was introduced to help Micro, Small, and Medium Enterprises (MSMEs)/ business enterprise borrowers overcome financial distress caused by the Covid-19 crisis.

Emergency Credit Line Guarantee Scheme [ECLGS] offers 100% guarantee coverage to banks and non-banking financial institutions (NBFCs) on credit extended to eligible MSMEs/business enterprises on their outstanding Guaranteed Emergency Credit Line (GECL) loan. The guarantee coverage is given by the National Credit Guarantee Trustee Company (NCGTC) on GECL of up to INR 5 lakh crores, as per the revised guidelines.

Emergency Credit Line Guarantee Scheme [ECLGS] Objective

This scheme has been designed to assist MSMEs/business enterprises through unsecured loans. Through this scheme, MSMEs/business enterprises can provide additional loans and meet their operational liabilities.

The resuming of the normal functioning of the MSMEs/business enterprises after the Covid-19 setback will ultimately benefit the country's economy. It is one of the major objectives of the Government to introduce this scheme.

Emergency Credit Line Guarantee Scheme [ECLGS] - Eligibility Criteria

The eligibility criteria for Emergency Credit Line Guarantee Scheme [ECLGS] are:

  • The outstanding loans of MSME/business enterprise must not be more than 50 crores as of 29 February 2020.
  • The turnover of the MSME/business enterprise does not exceed 250 crores for FY 2019-20.

Interest Rate and Tenure of Emergency Credit Line Guarantee Scheme [ECLGS]

The interest rate for this scheme has been capped at 9.25% for banks. It is 14% for NBFCs.

The maximum tenure of the loan is five years from the disbursement date. The moratorium period is 12 months on the principal amount.

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Emergency Credit Line Guarantee Scheme [ECLGS] Validity

The scheme is valid up to 31 March 2023 or till guarantees for a total loan amount of 5 lakh crores are issued by NCGTC (whichever happens first).

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Emergency Credit Line Guarantee Scheme [ECLGS] Important Facts

  • The amount of money to be extended to MSMEs/business enterprises under the (ECLGS) Emergency Credit Line Guarantee Scheme amounted to 20% of the borrower's total outstanding credit as of 29 February 2020.
  • The last disbursement date for the Emergency Credit Line Guarantee Scheme [ECLGS] has been extended to 30 June 2022.
  • ECLGS 2.0 expanded the scheme to include 27 new sectors. This included the health sector.
  • ECLGS 3.0 declared the Civil Aviation, hospitality, and related sectors eligible for this scheme.
  • ECLGS 4.0 expanded this scheme to offer hospitals/medical colleges/nursing homes/clinics loans of up to 2 crores for establishing on-site oxygen generation plants at a 7.5% interest rate.
  • ECLGS 4.0 offers an additional loan of up to 10% of the outstanding amount as of 29 February 2020 for borrowers of ECLGS 1.0.
  • Under ECLGS 4.0, each borrower's maximum additional (ECLGS) Emergency Credit Line Guarantee Scheme support has been capped to 40% or INR 200 crores (whichever is lower).
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FAQs on Emergency Credit Line Guarantee Scheme [ECLGS]

Q.1. How much money has been disbursed under Emergency Credit Line Guarantee Scheme [ECLGS]?

As of 24 September 2021, INR 2.86 lakh crores had been disbursed under the Emergency Credit Line Guarantee Scheme [ECLGS].

Q.2. Under whose operational domain is Emergency Credit Line Guarantee Scheme [ECLGS]?

The Ministry of Finance manages the Emergency Credit Line Guarantee Scheme [ECLGS], Department of Financial Services (DFS).

Q.3. Does NCGTC or banks and NBFCs charge any fees for extending credit under Emergency Credit Line Guarantee Scheme [ECLGS]?

No charges are collected by NCGTC or banks and NBFCs for extending credit under the Emergency Credit Line Guarantee Scheme [ECLGS].

Q.4. Can MUDRA borrowers opt for Emergency Credit Line Guarantee Scheme [ECLGS]?

The Emergency Credit Line Guarantee Scheme [ECLGS] is available for interested borrowers under Pradhan Mantri MUDRA Yojana (PMMY).

Q.5. Is NCGTC a government-recognised company?

NCGTC providing guarantee for the Emergency Credit Line Guarantee Scheme [ECLGS] is a wholly Government-owned company.