It is no understatement to say that Micro, Small, and Medium-sized Enterprises (MSME) are crucial to India’s growth, given they contribute 30% to the country’s GDP. However, the sector struggled to keep afloat during the pandemic. According to reports, MSMEs faced a 46% decline in business due to the 2020 lockdown. Many businesses closed shut, while others struggled to stay afloat owing to cashflow shortages.
So, to help such business enterprises get back on their feet, the Government launched the Emergency Credit Line Guarantee Scheme (ECLGS) in 2020. Read on to learn what is ECLGS, and all the other important details about the scheme.
What is the ECLGS scheme?
The Finance Ministry launched the ECLGS scheme as a part of the Aatmanirbhar Bharat Abhiyan in 2020. Through the scheme, the Government offered government-guaranteed, collateral-free loans to businesses. The idea? To help enterprises to recover from the aftereffects of Covid-19 by providing them adequate liquidity to restart their business or help them meet their working capital requirements.
The Government has sanctioned Rs. 3.73 lakh crores to businesses through the scheme across four phases, helping thousands of small enterprises across India. What were these four phases? Read on to learn more.
Phases of the ECLGS
1. Emergency Credit Line Guarantee Scheme 1.0
Launched in 2020, the ECLGS allows eligible borrowers to secure GECL (Guaranteed Emergency Credit Line) loans or an additional loan facility amounting to 20% of their outstanding credit of up to Rs. 50 crores as of February 29, 2020. Note that these loans have a moratorium period of about a year and a repayment tenure spanning four years from the disbursement date.
Subsequently, the Government launched an ECLGS 1.0 (Extension) through which borrowers who availed of the ECLGS facility and new borrowers could avail of working capital loans or additional term loans amounting to 30% of their outstanding credit up to Rs. 50 crores as on February 29, 2020, or March 31, 2021. Note that the moratorium period is 2 years, and the repayment period is 5 years under this scheme. Besides, these provisions are not valid for previous support under the GECL.
2. Emergency Credit Line Guarantee Scheme 2.0
Through ECLGS 2.0, the Government aimed to extend loans to businesses in sectors identified by the Kamath Committee on Resolution Framework and healthcare. Accordingly, such enterprises could avail of GECL funding, term loans, or non-fund-based facilities of up to 20% if their outstanding credit of between Rs. 50 to Rs. 500 crores. Such loans have a moratorium period of a year and a repayment tenure of 5 years from the loan disbursement date.
In a subsequently launched ECLGS 2.0 (Extension), the Government extended the loan amount to 30% of the total credit outstanding (for fund-based facilities) up to Rs. 500 crores as on February 29, 2020, or March 31, 2021, whichever is higher, to eligible borrowers. Note that the moratorium period under this extension is 2 years, and the loan tenure is 6 years
3. Emergency Credit Line Guarantee Scheme 3.0
To extend support to enterprises in the Hospitality, Tourism, Leisure, Travel, and Sporting sectors, the Government launched the ECLGS 3.0. The scheme provided loans to businesses requiring greater than Rs. 500 crores. Accordingly, borrowers can request up to 40% of their outstanding credit subject to a cap of Rs. 200 crores per borrower.
Once again, the Government launched an ECLGS 3.0 (Extension) wherein it allowed eligible businesses other than aviation to take out loans up to 50% of their total credit outstanding, subject to a cap of Rs. 200 crores for borrowers meeting eligibility criteria. In comparison, aviation businesses could take out fund or non-fund-based loans of up to 50% of their total credit outstanding, subject to a cap of Rs. 400 crores.
Plus, airline businesses could take fund-based and non-fund-based loans up to 100% of their total credit outstanding, subject to a cap of Rs. 1500 crores per borrower, provided they meet the eligibility criteria.
Note that the moratorium period for the scheme and the extension is 2 years, and the repayment tenure is 6 years.
4. Emergency Credit Line Guarantee Scheme 4.0
Finally, to support businesses in healthcare, including hospitals, colleges, and nursing homes engaged in manufacturing oxygen cylinders or liquid oxygen, can request loan amounts of up to Rs. 2 crores per borrower for oxygen production. Note that the outstanding amount would include on-balance sheet exposure, meaning the outstanding amount across term loans WC koans and WCTL.
The moratorium period is 6 months, and the repayment tenure is 5 years for loans procured under this scheme.
Features of the scheme
1. Purpose
The scheme helps MSME businesses impacted by Covid-19 meet their working capital requirements by providing them with assured, government-backed loans.
2. Loan amount
The maximum loan amount under the scheme is Rs. 3 lakh crore.
3. Repayments
Loans extended under the scheme have a moratorium and loan repayment period. These differ according to your industry and your scheme eligibility.
4. Government-backing
The National Credit Guarantee Trustee Company (NCGTC) provides a 100% coverage guarantee to Member Lending Institutions (MLI), Non-Banking Financial Companies (NBFC), banks, and Financial institutions. This helps them extend loans to businesses through the scheme.
Eligibility criteria
Scheme
Eligibility criteria
ECLGS 1.0 scheme
Borrowers with total outstanding credit up to Rs. 50 crores, wherein the borrower’s account is less than 60 days past due on February 29, 2020.
ECLGS 1.0 (Extension) scheme
Borrowers who have claimed assistance under ECLGS 1.0 and new businesses eligible under the revised scheme as of March 31, 2021.
ECLGS 2.0 scheme
Businesses in sectors identified by the Kamath Committee Resolution Framework and Healthcare sectors with total outstanding credit between Rs. 50 crores and Rs. 500 crores, wherein the borrower’s account is less than 60 days past due on February 29, 2020.
ECLGS 2.0 (Extension) scheme
Borrowers who have claimed assistance under ECLGS 2.0 and new businesses eligible under the revised scheme as of March 31, 2021.
ECLGS 3.0 scheme
MSMEs in hospitality and related sectors, and civil aviation sector, whose account is less than 60 days past due on February 29, 2020.
ECLGS 3.0 (Extension) scheme
Borrowers who have claimed assistance under ECLGS 3.0 based on the revised reference dates March 31, 2021, and January 31, 2022.
ECLGS 4.0 scheme
Enterprises engaged in manufacturing liquid oxygen and oxygen cylinders with a credit facility that is less than 90 days past due as on March 31, 2021.
You can apply for ECLGS with any financial institution. That said, remember it is now exclusively available for existing users.
If you’re an existing Tata Capital customer, visit our website to apply for the ECLGS. That said, even if you're a small business that cannot secure a loan under ECLGS, worry not. We, at Tata Capital, offer business loans tailored to your needs. Visit our website to learn more about our low-interest loans.
05 July 2023
6 mins read
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