The Government extends the Rs. 3-lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS) until 30th June 2021, widening its scope to support new sectors such as hospitality, travel, and tourism. This scheme was first introduced in May 2020, in response to the Covid-19 crisis, as part of the Centre’s Atmanirbhar package. The main aim is to aid small businesses that are struggling due to the nationwide lockdown.
ECLGS 1.0: Additional Credit for Small Businesses
The ECLGS 1.0 scheme was designed to provide fully guaranteed, collateral-free credit to MSMEs, business enterprises, MUDRA borrowers and individual loans for business purposes. The additional credit provided would be to the extent of 20% of their credit outstanding as on 29th February, 2020. All MSMEs with up to Rs 25 crore outstanding and Rs. 100 crore turnover were eligible. However, post amendments in November 2020, the turnover cap was removed, leading to the birth of ECLGS 2.0.
ECLGS 2.0: Catering to Stressed Sectors
The modified version, ECLGS 2.0, was more focused on aiding entities in 26 stressed sectors identified by the Kamath Committee along with the healthcare sector. This catered to those with a credit outstanding of more than Rs. 50 crore and up to Rs. 500 crore as of 29th February, 2020. According to this scheme, borrower accounts had to be less than or equal to 30 days past due as of 29th February, 2020. SMAs or Special Mention Accounts, showing signs of early stress leading to the borrower defaulting, were not permitted. Furthermore, the revised scheme increased the repayment window from four years in ECLGS 1.0 to five years.
ECLGS 3.0: Expanding Credit and Scope
ECLGS 3.0 aimed at extending credit of up to 40% of total credit outstanding across all lending institutions as on 29th February 2020. The tenure of loans granted under ECLGS 3.0 was designed for 6 years, including a moratorium period of 2 years. This version extends its helping hand to business enterprises in the Hospitality, Travel & Tourism, Leisure & Sporting sectors as long as they had a total credit outstanding not exceeding Rs. 500 crore and overdues, if any, for 60 days or less.
National Credit Guarantee Trustee Company: The Provider
National Credit Guarantee Trustee Company (NCGTC) acts as the guarantee provider under the ECLGS scheme. Incorporated in 2014 under the Companies Act, 1956, NCGTC is established by the Department of Financial Services, Ministry of Finance, as a wholly-owned company of the Government of India. It’s role is to act as a common trustee company for multiple credit guarantee funds. Credit guarantee programs are designed to share the lending risk of the lenders and in turn, facilitate access to finance for prospective borrowers.
