Emergency Credit Line Guarantee Scheme (ECLGS)

The Finance Ministry of India introduced a new business loan scheme Emergency Credit Line Guarantee Scheme (ECLGS) in May 2020 to support MSMEs affected by Covid 19. The government has planned to provide Rs. 3 lakh crore of MSME loan to business enterprises that are struggling to get pace in coronavirus lockdown. 

The government announced a three-month extension of ECLGS till September 30, 2021. 

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Apart from providing funds to MSMEs to manage their working capital flow, ECLGS will also be extending for sectors like hospitality, travel and tourism, leisure, gym/spa, and sporting sectors that were badly affected from Covid 19. ECLGS 4.0 will also offer 100% guarantee cover to loans up to Rs.2 crore to hospitals/nursing homes/clinics/medical colleges for setting up on-site oxygen generation plants, interest rate capped at 7.5%.

Loan Tenure 

60 months including principal moratorium for the first 12 months.

ECLGS Key Highlights

  • Borrowers with up to INR 25 crore outstanding as of Feb 29, 2020, and up to INR 100 crore annual turnover for FY 2020 will be eligible.
  • Loans sanctioned under ECLGS would be up to 20% of the borrower’s total outstanding credit as of Feb 29, 2020.
  • Loans provided to  Business  Enterprises/MSMEs constituted as  Proprietorship, Partnership, a registered company, trusts and Limited Liability Partnerships (LLPs) shall be eligible under the Scheme.
  • Business Enterprises/MSME borrower must be Goods and Services Tax (GST) registered in all cases where such registration is mandatory.  This condition will not apply to Business Enterprises/MSMEs that are not required to obtain GST registration.
  • Borrower  accounts  which  had  NPA  or  SMA-2  status  as  on  Feb  29,  2020  shall  not  be eligible under the scheme.
  • Nil processing charges and waiver of foreclosure/prepayment charges.
  • No additional collateral requirement.
  • Additional ECLGS assistance of up to 10% of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0, in tandem with restructuring as per RBI guidelines of May 05, 2021
  • The current ceiling of Rs. 500 Cr. of loan outstanding for eligibility under ECLGS 3.0 to be removed, subject to maximum additional ECLGS assistance to each borrower has limited to 40% or Rs.200 crore, whichever is lower.
  • Civil Aviation sector to be eligible under ECLGS 3.0.

ECLGS Validity 

Validity of ECLGS extended to 30.09.2021 or till guarantees for an amount of Rs.3 lakh crore are issued. Disbursement under the scheme permittedup to 31.12.2021.

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I approached Ziploan for an equipment finance loan. Their eligibility criterion was easy to fulfill because it required only 2 years ITR and 10 lacs of annual banking credit.

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