Emergency Credit Line Guarantee Scheme – ECLGS

Emergency Credit Line Guarantee Scheme (ECLGS)

The union cabinet approved the Emergency Credit Line Guarantee Scheme on 20-05-2020 as per COVID-19 relief packages introduced by the government of India. The full scheme document is not yet made available, but following are the salient features of the scheme.

Objectives of the Scheme

• To support the MSME in response to the unprecedented situation caused by COVID-19 and consequent lockdown.

• To enable additional funding of upto Rs. 3 lakh crores to eligible MSMEs and interested MUDRA borrowers by way of “Emergency Credit Line Guarantee Scheme”.

• Under this scheme 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding upto Rs. 3 lakh crores to eligible MSMEs and interested MUDRA borrowers, in the form of a Guaranteed Emergency Credit Line (GECL) facility.

Salient Features of the Scheme

Eligible Borrowers – All MSME borrower accounts with outstanding credit of upto Rs. 25 crores as on 29-02-2020 which were less than or equal to 60 days past due as on that date i.e. regular, SMA 0 and SMA 1 accounts, and with an annual turnover of upto Rs. 100 Crores would be eligible for GECL funding under the scheme.

Extent of Funding – The amount of GECL funding to the eligible MSME borrowers either in form of additional working capital term loans (in case of bank and FIIs), or additional term loans (in case of NBFCs) would be upto 20% of their outstanding credit upto Rs. 25 crores as on 29-02-2020.

Guarantee by Govt – The entire funding provided under this scheme shall be provided with a 100% credit guarantee by NCGTC under ECLGS.

Tenure of Loan – The tenure of loan under this scheme will be 4 years with moratorium of 12 months.

Guarantee Fees – No guarantee fees will be charged by NCGTC from the Member Lending Institutions under the scheme.

Interest Rates – Interest rates under the scheme shall be capped at 9.25% for banks and 14% for NBFCs.

Time period of Scheme – The scheme will remain in force upto 31-10-2020 or till the amount of Rs. 3 lakh crores is sanctioned under this scheme, whichever is earlier.

Ways to Go forward

• Detailed scheme document with bank wise break up of budgets allocated regarding implementation of the scheme is to be released.

• Banks to come with their internal implementation plans or circulars regarding this scheme.

To see full Press release by government please Click Here

Source – www.pib.gov.in

Complied by
Amit Mundhra FCA
He is a member of ICAI and he can be reached at amit.mundhra@gmail.com

Author: Amit Mundhra CA
Amit Mundhra FCA is a Fellow member of the Institute of Chartered Accountant of India. He is senior partner in Karnani & Co., Chartered Accountants. He is having 20+ years of experience in Income Tax, GST, VAT, Accounting, Audit and Assurance field.

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