Emergency Credit Line Guarantee Scheme (ECLGS)

Context:

The government has extended the ₹3-lakh-crore emergency credit line guarantee scheme by another three months till June 30 and also widened its scope to new sectors, including hospitality, travel and tourism.

Details:

1. ECLGS 3.0 would involve extending credit of up to 40% of total credit outstanding across all lending institutions as on February 29, 2020.
2. The tenor of loans granted under ECLGS 3.0 would be 6 years, including a moratorium period of 2 years.

ECGL Scheme

• Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
• The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
• The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.

Aims and objectives

• The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
• The main objective is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.
• It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.

Salient features

• The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
• Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
• No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
• Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

ECLGS 3.0

• It would involve extension of credit of upto 40% of total credit outstanding across all lending institutions.
• The tenor of loans granted under ECLGS 3.0 shall be 6 years including moratorium period of 2 years.
• Further, the validity of ECLGS i.e. ECLGS 1.0, ECLGS 2.0 & ECLGS 3.0 have been extended upto 30.06.2021 or till guarantees for an amount of Rs. 3 lakh crore are issued.
• The revised operational guidelines in this regard shall be issued by National Credit Guarantee Trustee Company Ltd (NCGTC).