Emergency Credit Linked Guarantee Scheme (ECLGS)

Subject – Economy

Context – ‘Strong buffers will help, as banks tackle asset risks’. ECLGS helped with liquidity: Moody’s

Concept –

The scheme was launched as part of the Aatmanirbhar Bharat Abhiyan package announced in May 2020 to mitigate the distress caused by coronavirus-induced lockdown, by providing credit to different sectors, especially Micro, Small and Medium Enterprises (MSMEs).
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 being provided by the National Credit Guarantee Trustee Company, whereas Banks and Non Banking Financial Companies (NBFCs) provide loans.
Eligibility: Borrowers with credit outstanding up to Rs. 50 crore as on 29th February, 2020, and with an annual turnover of up to Rs. 250 crore are eligible under the Scheme.
On 1st August, the government widened the scope of the Rs. 3 lakh crore-ECLGS scheme by doubling the upper ceiling of loans outstanding and including certain loans given to professionals like doctors, lawyers and chartered accountants for business purposes under its ambit.
Tenor of loans provided under the Scheme is four years, including a moratorium of one year on principal repayment.
Interest rates under the Scheme are capped at 9.25% for Banks and Financial Institutions (FIs), and 14% for NBFCs.