Emergency Credit Line Guarantee Scheme

• 03 Nov 2020

Why in News

The Union Government has extended the Emergency Credit Line Guarantee Scheme (ECLGS) by one month till 30^th November, 2020, or till such time that an amount of Rs. 3 lakh crore is sanctioned under the Scheme, whichever is earlier.

• 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).

Key Points

• 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 29^th 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 29^th February, 2020, and with an annual turnover of up to Rs. 250 crore are eligible under the Scheme.
  
  • On 1^st 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.
• Present Status: As per data uploaded by Member Lending Institutions on the ECLGS portal, an amount of Rs. 2.03 lakh crore has been sanctioned under the Scheme to 60.67 lakh borrowers so far, while an amount of Rs. 1.48 lakh crore has been disbursed.

National Credit Guarantee Trustee Company Ltd

• NCGTC is a private limited company incorporated under the Companies Act, 1956 in 2014, established by the Department of Financial Services, Ministry of Finance, as a wholly owned company of the Government of India, to act as a common trustee company for multiple credit guarantee funds.
  
  • Credit guarantee programmes are designed to share the lending risk of the lenders and in turn, facilitate access to finance for the prospective borrowers.

Source: PIB