Emergency Credit Line Guarantee Scheme (ECLGS)￼
The COVID-19 pandemic hit very hard on Indian business enterprises. The companies struggled a lot to meet their daily expenses. To mitigate the losses caused by the Covid-19 pandemic on various business enterprises in the country, the Indian Government launched an Emergency Credit Line Guarantee Scheme (ECLGS).
What is ECLGS?
The ECLGS scheme was announced in May 2020 by the Finance Ministry.
The scheme aims to provide 100% guaranteed credit to Micro, Small and Medium Enterprises (MSMEs) across India to help them overcome the losses suffered due to Covid-19. It relieves MSMEs by helping them meet their working capital requirements and encouraging them to fulfill their dreams and desires.
This scheme is a part of the Government’s Aatmanirbhar Bharat Abhiyan. The scheme focuses on providing collateral-free, government-guaranteed loans to MSMEs worth ₹ 3 lakh crore.
Phases of ECLGS-
Emergency Credit Line Guarantee Scheme 1.0
Under the ECLGS version 1.0, borrowers can get the credit of up to 20% of their total outstanding loan as on February 29, 2020, provided the total outstanding loan of the MSMEs should not exceed ₹50 Crores as on February 29, 2020. In this, the borrowers are provided, 1 year moratorium period and a 4-year repayment period from the date of disbursement. The scheme was valid up to November 2020.
Emergency Credit Line Guarantee Scheme 2.0
Version 2.0, extended the finance minister’s aim to provide guaranteed loans to 26 stressed sectors identified by the Kamath Committee and the healthcare sector. In this phase, the guaranteed credit was available to the borrowers whose total outstanding loan as on February 29, 2020, was between ₹50-500 crores, up to 20% of the outstanding amount. In this, the borrowers are provided 1 year moratorium period for repayment of principal and a total 5-year repayment period from the date of disbursement. This scheme’s validity was till March 2021.
The sectors included power, construction, iron and steel manufacturing, roads, real estate, textiles, chemicals, consumer durables, non-ferrous metals, pharma manufacturing, logistics, gems and jewellery, cement, auto components, hotels-restaurants-tourism, mining, plastic product manufacturing, automobile manufacturing, auto dealerships, aviation, sugar, ports and port services, shipping, building materials, and corporate retail outlets.
Emergency Credit Line Guarantee Scheme 3.0
ECLGS 3.0 was launched to extend support to Hospitality, Travel and Tourism, Leisure, and Sporting sectors. The scheme is highly beneficial for businesses that are looking for credit above ₹500 crores. The scheme will only consider loans less than 60 days overdue as on 29 February 2020.Under this, borrowers can get credit of up to 40% (earlier 20%) of their total outstanding loan as on February 29, 2020. The loan tenure under this scheme was 6 years, including 2 years moratorium period and 4 years repayment period. The scheme was valid till June 2021.
It also extended the ECLGS 1.0 and ECLGS 2.0 by another 3 months.
Emergency Credit Line Guarantee Scheme 4.0
To further support MSMEs, the Government widened the scheme’s validity by 3 months till September 2021. The scheme supports all hospitals, nursing homes and colleges engaged in manufacturing liquid oxygen, oxygen cylinders etc.having credit facilities with the lending institution with the days past due up to 90 days as on March 31, 2021. Borrowers are eligible for assistance of up to ₹2 crores for setting up oxygen plants, technologies like pressure swing absorption etc for on-site oxygen-producing plantsFor this scheme, the guaranteed coverage would be 100% of the amount in default.
Features of ECLGS-
- The scheme supports the Covid-19 hit business enterprises by extending support to MSMEs to meet their daily expenses and working capital requirements.
- The maximum amount of credit under this is ₹3 lakh crore.
- Through this scheme, the Government aims to prevent the collapse of small enterprises and help them sustain themselves financially in this crisis.
- Based on the scheme, the borrowers need to pay only interest in the first one or two years, and in the subsequent years, they must pay both the interest and the principal amount.
- As per this scheme, 100% guarantee coverage is to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) to the Member Lending Institutions (MLI), Banks, Financial Institutions, and Non-Banking Financial Companies (NBFC)
How to apply for ECLGS
One can avail of the ECLGS scheme from any leading institution. The scheme is available for existing users who are pre-authorized and not new users who are signing up now.
You can check your eligibility criteria here:
Eligibility criteria for the borrowers-
ECLGS 1.0- Eligible borrowers under 1.0 will be those with a total outstanding credit up to ₹50 crores as of 20.02.2020, and the borrower’s account should be less than or equal to 60 days past due as of 20.02.2020.
ECLGS 2.0- Eligible borrowers under 2.0 will be those with total outstanding credit above ₹50 crore and up to ₹500 Crore as of 20.02.2020, and the borrower’s account should be less than or equal to 60 days past due as of 20.02.2020.
ECLGS 3.0- Eligible borrowers under 3.0 will be those with total outstanding credit above ₹500 crore, and the borrower’s account should be less than or equal to 60 days past due as of 20.02.2020.
ECLGS 4.0- Eligible borrowers under 4.0 will be those with accounts up to 90 days as of 31.03.2021. Borrowers are eligible for assistance of up to ₹2 crores for setting up oxygen plants.
Interest Rate and Tenure of ECLGS-
|Versions of ECLGS||Maximum Interest Rate|
|ECLGS 1.0, 2.0 and 3.0||9.25% for Banks and Financial Institutions|
14% for Non-Banking Financial Companies
|ECLGS 4.0||7.5% for the lending institutes.|
ECLGS is the Emergency Credit Line Guarantee Scheme which was launched by the Finance Ministry of India to extend support to financially hit business enterprises due to the Covid-19 pandemic. Through this scheme, the Government aims to provide 100% guaranteed coverage to the Micro, Small and Medium Enterprises (MSMEs) across India to help them recover the losses due to the crisis. The Government’s vision is to provide loans up to ₹3 lakh crores to small enterprises to help them meet their daily expenses and working capital requirements.
At its launch, it had validity till October 2020, which was later extended till November 2020. The later versions of ECLGS made it valid till September 2021. The Government kept on upgrading the scheme in its four phases. The interest as per ECLGS 4.0 is 7.5% and the tenure is 6 years, including 2 years moratorium period and 4 years loan repayment period.
Frequently Asked Questions (FAQs)
What is the objective of ECLGS?
ECLGS has a specific objective to provide financial assistance to the Micro, Small and Medium Enterprises (MSMEs) across India to help them mitigate the losses suffered due to the Covid-19 pandemic.
Who are the MLIs under the scheme?
MLIs are Member Lending Institutes. They cover all the financial institutes. NBFCs which have been in operation for at least 2 years as of 29.2.2020 are also eligible MLIs.
What is the guarantee of the scheme?
The scheme guarantees 100% credit to the banks and other lenders by the National Credit Guarantee Trustee Company Limited (NCGTC).
Is there a need to open a separate loan account to avail loan under this scheme?
Yes, borrowers shall open a separate loan account to avail of loans through the ECLGS scheme. This account would be different and distinct from the existing loan account.