ECLGS

Subject :Govt Schemes

Context : Government plans to extend the deadline for Emergency Credit Line Guarantee Scheme for MSME’s. Banks have sanctioned 62.52 percent of the targeted Rs. 3 lakh crore under this scheme till now.

Concept :

• ECLGS was rolled out as part of the Centre’s Aatmanirbhar package in response to the Covid-19 crisis. The objective was to support small businesses struggling to meet their operational liabilities due to the imposition of a nationwide lockdown.
• The ECLGS provides for the Guaranteed Emergency Credit Line (GECL) facility. The GECL is a loan for which 100% guarantee is provided by the National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs) – banks, financial institutions and Non-Banking Financial Companies (NBFCs).
• The loans are extended in the form of additional working capital term loan facility in case of banks and additional term loan facility in case of NBFCs to eligible MSME enterprises and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers.
• First-time borrowers and Non-Performing Asset (NPA) accounts cannot raise funds under the scheme.
• The tenor of loans provided under the GECL facility is four years from the date of disbursement.
• A moratorium period of one year on the principal amount is provided.
• Interest rates of banks and financial institutions have been capped at 9.25% per annum, while NBFCs can lend at a maximum of 14% per annum.
• The Scheme is applicable to all loans sanctioned under the GECL facility during the period from, 23rd May 2020 to 31st October, 2020, or till an amount of Rs. 3 lakh crore is sanctioned under GECL, whichever is earlier.