ECLGS: Key Features of Emergency Credit Line Guarantee Scheme in 2023

Introduction

The Emergency Credit Line Guarantee Scheme or ECLGS scheme was authorized by the Union Cabinet, which is chaired by Prime Minister Narendra Modi. To lessen the hardship brought on by the COVID-19 epidemic, the plan was introduced as part of the Atma Nirbhar Bharat package for the Micro, Small, and Medium Enterprises (MSME) borrowers.

What makes ECLGS newsworthy?

Candidates should be aware that the Finance Ministry has enlarged the scope of ECLGS scheme in preparation for the UPSC Prelims in 2022. Following the first announcement of the program in May 2020, the Finance Ministry gradually broadened the ECLGS’s purview.

ECLGS 4.0, which was just announced (in May 2021), offers a 100% guarantee cover on loans up to Rs. 2 crore made to hospitals, nursing homes, clinics, and medical institutions for the construction of on-site oxygen production facilities, with an MSME loan interest rate maximum of 7.5%.

Eligibility:

• Under ECLGS 1.0 Extension, lenders who fulfill the guidelines’ qualifying criteria can receive up to 30% of their total outstanding credit (fund-based solely and excluding the available ECLGS limit) as of February 29, 2020 or March 31, 2021, whichever is later.

• Under the ECLGS 2.0 Extension, borrowers from the 26 identified industries based on the Kamath Committee and the Healthcare Sector who meet the eligibility criteria, as defined by the guidelines, can be provided with assistance of up to 30% of the total outstanding credit, whichever is higher.

• Under ECLGS 3.0 Extension, eligible borrowers who meet the eligibility requirements outlined in the guidelines and fall under stressed sectors like the hospitality, travel & tourism, leisure & sports, and civil aviation, among others, may receive assistance equal to up to 40% of their total outstanding limit, whichever is higher. The highest amount of help is 200 crore INR.

• Under ECLGS 4.0, existing Hospitals, Nursing Homes, Clinics, Medical Colleges, and Units Engaged in the Manufacturing of Liquid Oxygen, Oxygen Cylinders, etc. may be granted a maximum of up to INR 2 crore for the establishment of on-site oxygen producing plants, and they should not be Non-Performing Assets (NPA).

The Emergency Credit Line Guarantee Scheme: Key characteristics (ECLGS)

1. All MSME loan accounts, including normal, SMA 0 and SMA 1 accounts, having outstanding credit of up to Rs. 25 crore as of 29.2.2020 and less than or equal to 60 days past due on that date and with a yearly revenue of up to Rs. 100 crore will be qualified for GECL assistance under the Scheme.

2. The amount of GECL funding to qualified MSME borrowers would be up to 20% of their total outstanding credit up to Rs. 25 crore as of February 29, 2020, either in the form of extra working capital term loans (in the case of banks and Fls) or additional term MSME loan (in the case of NBFCs).

3. The whole amount of funds made available under the GECL will be given to MLIS under the ECLGS with a 100%     credit guarantee from NCGTC.

4. Loans made under the ECLGS scheme must have a four-year term and a one-year moratorium on the principal.

5. Under the Scheme, NCGTC will not impose any guarantee fees on Member Lending Institutions (MLIS).

6. The maximum interest rates allowed under the Scheme are 9.25% for banks and FLs and 14% for NBFCs.

These are the key features of ECLGS scheme in India. These will be essential for small and medium sized businesses in 2023.  To summarize, the Government of India chose to take care of making the country self-sufficient in order to revamp the country’s economy, which had suffered significant disruptions as a result of the COVID lockdown. One of these efforts is the Emergency Credit Line Guarantee Scheme.