Emergency Credit Line Guarantee (ECLG) Scheme of 2020

 

The pandemic period, especially the year 2020 was difficult for all MSMEs. The government of India launched a relief package for MSMEs in 2020 when the COVID-19 induced lockdown, shut all operations. One of the schemes launched by the government was the ECLGS. Full form of ECLGS is Emergency Credit Line Guarantee Scheme. This scheme is a part of the Aatmanirbhar Bharat package (self-reliant India) announced in May 2020. The total package was worth ₹20 lakh crore and targeted towards addressing various needs of working capital needs, credit for restarting the business, etc.

Over the last three years, the ECLG scheme has been further extended and enhanced to suit MSMEs in various sectors that were severely impacted by COVID-19. This article will explain what ECLGS is, its eligibility, required documents, and so on.

What is ECLG Scheme and its key features?

In simple terms, the Emergency Credit Line Guarantee Scheme or ECLGS is a loan scheme. According to its guidelines, credit of up to 20% of the existing business loan dues is given to eligible MSMEs.

This scheme was launched with the clear objective of offering relief to MSMEs distressed by the COVID-19 induced lockdowns and other operational disruptions.

Key features of ECLGS

• Loan amount: A loan of up to 20% of existing business loan’s dues is given to eligible entrepreneurs.
• Collateral involvement: The borrower does not have to promise any collateral. It is a collateral free loan scheme.
• Fees and charges: No processing fee is charged for ECLG scheme.
• Tenure: Repayment tenure is of up to 4 years or 48 months from the date of disbursal.
• Moratorium: The scheme offers a moratorium of up to one year in which the borrower does not have to pay the principal amount of the loan. However, the borrower continues paying for the interest on the loan.

Note: The original period for the ECLG Scheme was two years which was later extended to March 31, 2023.

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Eligibility criteria for the ECLG scheme (and updates)

• For ECLGS 1.0: MSMEs with outstanding loans of up to ₹50 crore as on February 29, 2020, and turnover of up to ₹250 crore in 2019-20 are eligible. Loans including a business loan, a government loan scheme like Mudra loan and an individual loan taken for business purposes can be considered for the scheme.
• For ECLGS 2.0: The relief is provided to MSMEs associated with 26 stressed sectors identified by the Kamath committee and the healthcare sector having loan outstanding above ₹50 crore and below ₹500 crore and days past due up to 60 days as on February 29, 2020. These identified sectors included iron and steel, construction, real estate, logistics, hotels, restaurants, tourism, etc.
• For ECLGS 3.0: Borrower from the hospitality, travel and tourism, leisure and sporting and civil aviation industries having outstanding loan and days past due up to 60 days as on February 29, 2020.
• For ECLGS 4.0: The scheme was extended to existing hospitals, nursing homes, clinics, medical colleges that are engaged in manufacturing of liquid oxygen or oxygen cylinders, etc. having a loan with days past due up to 90 days as on March 31, 2021.

Apart from the sectors mentioned above following eligibility criteria are also taken into consideration:

• Loan under the ECLG Scheme is provided only to those accounts which are classified as regular, SMA-0 (special mention account), or SMA-1 as on February 29, 2020. The business loan accounts classified as SMA-2 or NPA (non-performing asset) are not eligible for the loan under ECLG scheme.
• The MSME must be a GST registered company.
• The scheme is valid only for the existing customers of the Member Lending Institutions (MLI).

What is the interest rate on ECLG Scheme loans?

Generally, the rate of interest on a business loan is decided by the lender while it is regulated by the Reserve Bank of India. However, in the case of ECLGS, the interest rates are capped by the government of India. Bank and NBFCs can charge:

• Banks can charge an interest rate of up to 9.25%
• Non-banking financial institutions i.e., NBFCs can charge an interest rate of up to 14%

The application procedure of ECLG scheme

The Emergency Credit Line Guarantee scheme loan works like a pre-approved business loan. It means that the applicant or borrower does not have to approach the bank or NBFC. Since enterprises having existing loan accounts are eligible, lenders already have the details of the borrower and loan status. Hence the lender approaches the eligible borrower.

Steps to log in to ECLGS

Once you have applied for the ECLG scheme, you can check its status online. Here are the steps to log in to the ECLGS portal.

• Visit the official website of ECLGS
• Click ‘Visit ncgtc.in’. The website of National Credit Guarantee Trustee Company Ltd (NCGTC) will open.
• Click on ‘ECLGS Login’
• You will be transferred to the log in page i.e. https://app.eclgs.com/EGS/jsp/Home.jsp
• Fill in your member id, user id and password. Enter captcha. Click the checkbox to agree terms and conditions. Click on submit to log in.

Closing thoughts

Emergency Credit Line Guarantee is one of the many schemes that the government of India has launched for MSMEs. Apart from this, there are multiple business loan schemes and subsidy schemes you can avail of. While you choose to obtain any business loan, keep following points in mind:

• Determine the need for obtaining the loan. Define the purpose, have a robust growth strategy in place, so that you can make timely repayment.
• If you are short of funds due to delayed payments from customers, you can seek the help of MSME Samadhaan. On the other hand, there are other options such as digital lending solutions, which you can explore.
• IPO is yet another way of raising money. You can check your eligibility for IPO.

Also Read: NSE SME IPO