Emergency Credit Line Guarantee Scheme

Emergency Credit Line Guarantee Scheme

Subject :Economy

Context: 

Emergency Credit Line Guarantee Scheme (ECLGS), has benefitted around 1.19 crore businesses.

Concept:

Emergency Credit Line Guarantee Scheme (ECLGS) 

• It was announced as part of the AtmaNirbhar Bharat Package in 2020.
• It aims to help businesses including MSMEs to meet their operational liabilities and resume businesses in view of the distress caused by the COVID-19 crisis.
• Objective: To provide fully guaranteed and collateral free additional credit to MSMEs, business enterprises, MUDRA borrowers and individual loans for business purposes to the extent of 20% of their credit outstanding as on 29th February, 2020.
• 100% guarantee coverage is to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) to the Member Lending Institutions (MLI), Banks, Financial Institutions, and Non-Banking Financial Companies (NBFC) against any losses suffered by them due to non-repayment of the ECLGS funding by borrowers.
• 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 is under the operational domain of the Ministry of Finance, Department of Financial Services (DFS).
• The scheme was launched with an initial admissible limit of the guarantee cover at ₹3 lakh crore which was later enhanced to ₹4.5 lakh crore and further to ₹5 lakh crore in the 2022-23 budget announcement.
• The eligibility criteria for availing credit under ECLGS are:
  • For ECLGS 1.0; MSME units, Business Enterprises, Mudra Borrower and individual loans for business purpose having loan outstanding upto Rs.50 crore and days past due upto 60 days as on 29.02.2020.
  • For ECLGS 2.0; Borrower belonging to 26 stressed sectors identified by Kamath Committee & Healthcare sector having loan outstanding above Rs.50 crore and upto Rs.500 crore and days past due upto 60 days as on 29.02.2020.
  • For ECLGS 3.0; Borrower belonging to Hospitality, Travel & Tourism, Leisure & Sporting and Civil Aviation sector having days past due upto 60 days as on 29.02.2020.
  • For ECLGS 4.0; Existing Hospitals/Nursing Homes/Clinics/Medical Colleges/units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. having credit facility with a lending institution with days past due upto 90 days as on March 31, 2021.

National Credit Guarantee Trustee Company Limited

• NCGTC or the National Credit Guarantee Trustee Company Limited is registered under the Companies Act, 1956 in 2014 as a private limited company.
• It is a wholly-owned company of the Government of India
• It was established by the Department of Financial Services, Ministry of Finance to act as a common trustee company for multiple credit guarantee funds.
• The main role of the Organisation is to design credit guarantee programs, to share the risk of lending among the lenders, and facilitate financial access to a prospective borrower.