Emergency Credit Line Guarantee Scheme (ECLGS) Explained

Ever since the launch, the ECLGS has undergone four revisions, leaving the SME businesses puzzled. Here is a composite story to understand the old and new revisions made in the scheme.


To insulate the SMEs from losses and prevent them from falling into the jaws of closure, the government in May 2020 has launched Emergency Credit Line Guarantee Scheme (ECLGS), as part of the Atmanirbhar Bharat campaign to address the liquidity crisis of Covid-hit existing SME borrowers. 

What is the Emergency Credit Line Guarantee Scheme (ECLGS)? 

The Emergency Credit Line Guarantee Scheme promises 100 percent guaranteed coverage to the banks, NBFCs (non-banking financial institutions) and other lending institutions to enable them to provide financial assistance to small businesses and startups that have been impacted in the covid-19 pandemic to fulfill their working capital requirements.

The validity of the scheme was till October 2020 that has undergone four revisions owing to the emergence of a second covid wave that led to the imposition of state-wise lockdowns and curfew that has impeded their ability to repay loans.  

As of July 2, 2021, Rs 2.73 lakh crore loans have been sanctioned, of which Rs 2.14 lakh crore was disbursed by partner banks and NBFCs.

In May 2021, the government raised the overall cap of admissible guarantee by Rs 1.5 lakh crore from Rs 3 lakh crore at the time of the scheme’s launch last year to Rs 4.5 lakh crore. 

Here in the story, we will clear the ambiguities of our readers regarding the old and the latest ECLGS scheme revisions brought by the government. 

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The Emergency Credit Line Guarantee Scheme promises 100 percent guaranteed coverage to the banks, NBFCs and other lending institutions to enable them to provide financial assistance to small businesses and startups impacted in the covid-19 pandemic to fulfill their working capital requirements.

The ECLGS Scheme 1.0 

The first version of the scheme aimed to provide Rs 3 lakh crore collateral-free, government-guaranteed loans to micro, small and medium enterprises across India that had outstanding credit of up to Rs 25 crore as of February 29, 2020, with an annual turnover cap of Rs 100 crore for the financial year 2019-2020.

The first version had a 1-year moratorium period and a 4-year repayment period. Borrowers can avail of additional credit up to 20 percent of their overall outstanding credit as of February 29, 2020. 

The scheme was valid till October 2020 but was later extended till November 2020. 

New Revision

In May 2021, the government announced that those business enterprises are also eligible for scheme 1.0 that have a loan outstanding up to Rs 50 crore and days past due up to 60 days as of February 29, 2020. 

The ECLGS Scheme 2.0 

In November 2020, version 2.0 was initiated by expanding the Rs 3 lakh crore scheme’s gambit to include 27 stressed sectors. In this, the limit of outstanding credit was increased from Rs 25 crore to Rs 50 crore.

Those stressed 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
  • Corporate retail outlets
  • Healthcare 

The ECGLS scheme 2.0 has a repayment period of 5 years including a one-year moratorium. The eligibility criteria of companies for this scheme should have dues of Rs 50-500 crore as of February 29, 2020. 

This scheme’s validity was increased till 31st March 2021. 

The ECLGS Scheme 3.0 

 We are no stranger to the fact that the brunt of lower out-of-home consumption has largely impacted the hospitality, travel and tourism, leisure, and sports sectors. On March 31st, 2021, expanded the gambit of Rs 3 lakh crore scheme to include businesses in hospitality, travel and tourism, leisure, and sporting sectors. 

The repayment period in scheme 3.0 is six years, and a moratorium period of 2 years. The scheme will only consider loans less than 60 days overdue as of February 29, 2020, with total credit outstanding not exceeding Rs 500 crore.

Version 3 of the ECGLS scheme was extended till 30th June 2021 and the first two versions were extended by another 3 months. 

New Revision

    • ECGLS 3.0 scheme will now also cover the civil aviation sector. 
    • The government has removed the current limit of Rs 500 crore loan outstanding for eligibility under ECLGS 3.0 subject to maximum additional ECLGS assistance to each borrower is limited to 40 percent or Rs 200 crore, whichever is lower.

 The ECLGS Scheme 4.0 

Under the 4th revised scheme, the government has announced a 100 percent guarantee to cover loans worth Rs 2 crore of hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants with the interest rate capped at 7.5 percent.

DU Desk
DU Desk
Stories from DU Desk are the collective efforts of our in-house authors, guest authors and subject matter experts who collate and distill their ideas and thoughts to bring out actionable insights for our readers.

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