The Union Government has recently announced an extension of the Emergency Credit Line Guarantee Scheme (ECLGS) until 30th November 2020. This extension is effective until such time that an amount of Rs. 3 lakh crore is sanctioned under the scheme, whichever comes first. Initially a part of the Aatmanirbhar Bharat Abhiyan package that was launched in May 2020, the scheme was introduced to alleviate the distress caused by the lockdown imposed due to the coronavirus pandemic, particularly for various sectors including Micro, Small and Medium Enterprises (MSMEs).
Objective of ECLGS
The primary objective of ECLGS is to offer guaranteed and collateral-free additional credit to MSMEs, business enterprises, MUDRA borrowers and individuals seeking loans for business purposes. The extent of this credit is provisioned to be 20% of their outstanding credit as of 29th February 2020. National Credit Guarantee Trustee Company provides the complete guarantee coverage while banks and Non-Banking Financial Companies (NBFCs) provision the loans.
Eligibility for ECLGS
The scheme is designed to include borrowers who had an outstanding credit of up to Rs. 50 crore as of 29th February 2020 and an annual turnover of up to Rs. 250 crore. The government expanded the scope of the ECLGS scheme on 1st August by increasing the upper limit of outstanding loans and incorporating specific loans offered to professionals such as doctors, lawyers and chartered accountants for business purposes.
Loan Terms under ECLGS
Loans extended under the scheme come with a tenure of four years which includes a one-year moratorium on the repayment of the principal amount. Interest rates under the scheme are capped at 9.25% for Banks and Financial Institutions and 14% for NBFCs.
Current Status of ECLGS
The Member Lending Institutions have reported that an amount of Rs. 2.03 lakh crore has been sanctioned under the scheme to 60.67 lakh borrowers so far while an amount of Rs. 1.48 lakh crore has been disbursed.
About National Credit Guarantee Trustee Company Ltd (NCGTC)
The NCGTC is a private limited company incorporated in 2014 under the Companies Act, 1956. The Department of Financial Services, Ministry of Finance established it as a wholly-owned company of the Government of India. Its primary role is to act as a common trustee company for several credit guarantee funds. Credit guarantee programs like these are developed to share the lending risk of the lenders and subsequently facilitate finance access for potential borrowers.
(Source: PIB)
Last Modified: February 9, 2024