Emergency Credit Line Guarantee Scheme (ECLGS)

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17-Aug-2022: Cabinet approves enhancement in the corpus of Emergency Credit Line Guarantee Scheme for increasing the limit of admissible guarantees

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi has approved the enhancement in the limit of Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 50,000 crore from Rs. 4.5 Lakh crore to Rs. 5 Lakh crore, with the additional amount being earmarked exclusively for enterprises in hospitality and related sectors.  The increase has been done on account of the severe disruptions caused by COVID-19 pandemic on hospitality and related enterprises.

Implementation schedule: ECLGS is a continuing scheme.  The additional amount of Rs. 50,000 crore would be made applicable to enterprises in hospitality and related sectors till validity of the scheme which is 31.3.2023.

Impact: ECLGS is an already operational scheme and on account of the disruptions caused by the COVID 19 pandemic on hospitality and related sectors, Government has specifically earmarked an amount of Rs. 50,000 crore for enterprises in these sectors.  The enhancement is expected to provide much needed relief to enterprises in these sectors by incentivizing lending institutions to provide additional credit of up to Rs. 50,000 crore at low cost, thereby enabling these business enterprises to meet their operational liabilities and continue their businesses.

Loans of about Rs. 3.67 Lakh crore have been sanctioned under ECLGS till 5.8.2022.

Background:

The ongoing pandemic has adversely impacted contact-intensive sectors, especially the hospitality and related sectors more severely.  While other sectors were back faster on the path of recovery, demand continued to be subdued for these sectors for longer period, suggesting the need for suitable interventions for their sustenance and recovery.  Further, given their high employment intensity and their direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery.  Recognising this, in Union Budget 2022-23, it was announced to extend validity of ECLGS upto March, 2023 and increase in the limit of guaranteed cover of ECLGS by Rs. 50,000 crore to total cover of Rs. 5 Lakh core, with the additional amount being earmarked exclusively for the enterprises in hospitality and related sectors.

With high immunization levels, progressive roll-back of restrictions and overall economic recovery, conditions are in place for sustained growth in demand for these sectors as well.  This additional guarantee cover is expected to support the recovery of these sectors as well.  This additional guarantee cover is expected to support the recovery of these sectors.

30-Mar-2022: Scope of Emergency Credit Line Guarantee Scheme (ECLGS) enhanced and validity extended till 31.3.2023

Giving effect to Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman’s announcement in Union Budget 2022-23, the National Credit Guarantee Trustee Company Limited (NCGTC) today extended the Emergency Credit Line Guarantee Scheme (ECLGS) beyond March 2022, till March 2023.

Further, following up on the suggestions received in the post Budget consultations held by the Finance Minister on 25th February 2022 with the Travel, Tourism and Hospitality sector and the Civil Aviation sector delegation led by the Minister of Civil Aviation, NCGTC also issued modifications to the operational guidelines for ECLGS 3.0.

Keeping this in view, the coverage, scope and extent of benefits under ECLGS 3.0 pertaining to hospitality, travel, tourism and civil aviation sectors has been expanded as follows:

  1. New borrowers in the sectors covered under ECLGS 3.0 who have borrowed after 31.3.2021 and up to 31.1.2022 will also now be eligible to avail of emergency credit facilities under ECLGS 3.0.
  2. The extent of emergency credit facilities that may be availed of under ECLGS 3.0 has been increased for eligible borrowers in all sectors covered under ECLGS 3.0. Eligible borrowers in all such sectors (other than the civil aviation sector) are now permitted to avail up to 50% of their highest fund based credit outstanding on any of three reference dates (29.2.2020, 31.3.2021 and 31.1.2022), as against the earlier limit of 40% of the higher of their fund-based outstanding on either of two reference dates (29.2.2020 and 31.3.2021). This is subject to the existing maximum of ₹200 crore per borrower.
  3. Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, eligible borrowers in the civil aviation sector are now permitted to avail of non-fund based emergency credit facilities as well under ECLGS 3.0. As against the earlier limit of availing up to 40% of the higher of their fund-based outstanding as on either of two reference dates, subject to a maximum of ₹200 crore per borrower, they can now avail of up to 50% of their highest total fund and non-fund based credit outstanding on any of the three reference dates referred to above, subject to a maximum of Rs. 400 crore per borrower. Further, to lower their cost of accessing non-fund-based credit, bank guarantees, letters of credit and other non-fund based facilities sanctioned under ECLGS 3.0 will be issued without any cash margin and subject to a cap of 0.5% per annum on the fee/commission.
  4. Individuals and proprietary concerns in the sectors covered under ECLGS 3.0 can also now avail of emergency credit facilities.
  5. In order to remove any doubt regarding eligibility on this account, the sectors covered under ECLGS 3.0 have been clarified by enumerating businesses covered under them.

The modifications introduced are aimed at enabling businesses in these contact-intensive sectors to get further support through enhanced coverage and collateral-free liquidity on capped interest rates / fees.

As on 25.3.2022, loans sanctioned under ECLGS have crossed ₹ 3.19 lakh crore, and about 95% of the guarantees issued are for loans sanctioned to Micro, Small and Medium Enterprises.

22-Mar-2022: More than 95% MSMEs benefitted under ECLGS

As informed by the National Credit Guarantee Trustee Company Limited, the agency which operates the Emergency Credit Line Guarantee Scheme (ECLGS), as on 11.3.2022, a total of 117.87 lakh businesses have been supported with 100% guaranteed collateral free loans under ECLGS of which about 95.21% were MSMEs. This was stated by Union Minister of State for Finance Dr Bhagwat Kisanrao Karad in a written reply to a question in Rajya Sabha today.

The Minister stated that the ECLGS was launched in May 2020 as part of the Aatmanirbhar Bharat Abhiyaan to support eligible Micro, Small and Medium Enterprises (MSMEs) and other eligible business enterprises in meeting their operational liabilities and restarting their businesses in the context of the disruption caused by the COVID-19 pandemic. It covered all the sectors of the economy. 100% guarantee is provided to Member Lending Institutions (MLIs) in respect of the credit facility extended by them under the scheme to eligible borrowers, the Minister added.

The Minister also stated that pursuant to an announcement made by the Finance Minister in her speech on the Union Budget 2022-23 that ECLGS will be extended till March 2023, Government has extended the scheme by one year, till 31.3.2023.

Giving more details, the Minister stated that the structure of scheme allows easy access to credit as the lenders offer pre- approved loans based on borrower’s existing credit outstanding and there is no fresh appraisal undertaken by lenders since additional credit is sanctioned over and above the credit facilities already assessed. Further, the interest rate is also capped with a view to lower the cost of credit and loans are sanctioned without any processing charges, pre- payment charges and guarantee fee.

On a question on RBI’s views on the MSME sector, the Minister stated that RBI has observed in its Financial Stability Report, December 2021 that MSMEs are reflecting signs of stress. In this connection, RBI has informed that the MSME portfolios of Commercial banks indicate accumulation in the non-performing asset and special mention account – 2 categories in September 2021, relative to March 2021.

5-Aug-2021: Emergency Credit Line Guarantee Scheme

Emergency Credit Line Guarantee Scheme (ECLGS) was announced as part of the Atma Nirbhar Bharat Package in 2020 with the objective to help businesses including MSMEs to meet their operational liabilities and resume businesses in view of the distress caused by the COVID-19 crisis, by providing Member Lending Institutions (MLIs), 100 percent guarantee against any losses suffered by them due to non-repayment of the ECLGS funding by borrowers.  The eligibility criteria for availing credit under ECLGS are:

  • For ECLGS 1.0; MSME units, Business Enterprises, Mudra Borrower and individual loans for business purpose having loan outstanding upto Rs.50 crore and days past due upto 60 days as on 29.02.2020.
  • For ECLGS 2.0; Borrower belonging to 26 stressed sectors identified by Kamath Committee & Healthcare sector having loan outstanding above Rs.50 crore and upto Rs.500 crore and days past due upto 60 days as on 29.02.2020.
  • For ECLGS 3.0; Borrower belonging to Hospitality, Travel & Tourism, Leisure & Sporting and Civil Aviation sector having days past due upto 60 days as on 29.02.2020.
  • For ECLGS 4.0; Existing Hospitals/Nursing Homes/Clinics/Medical Colleges/units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. having credit facility with a lending institution with days past due upto 90 days as on March 31, 2021.

The overall ceiling initially announced for ECLGS was Rs 3 lakh crore which was subsequently enhanced to Rs 4.5 lakh crore. However, ECLGS being a demand driven scheme, sanctions/disbursements are made by lending institutions based on assessment of borrower’s requirement and their eligibility.

ECLGS is under the operational domain of Ministry of Finance, Department of Financial Services (DFS). As informed by DFS, as on 2.07.2021 an amount of Rs.2.73 lakh crore have been sanctioned under the scheme of which an amount of Rs.2.14 lakh crore has been disbursed. Total 1.14 crore borrowers have been issued guarantee under the scheme.

In order to ensure easy and softer repayment terms on the credit extended to the MSME sector, Government has capped the interest rate under ECLGS scheme at 9.25 percent for Banks and Financial Institutions and 14 percent for Non-Banking Financial Institutions. This scheme also offers a one year moratorium on payment of principle component.  In addition to this, the other scheme announced under Atma Nirbhar Bharat package i.e. ‘Credit Guarantee Scheme for Subordinate Debt’ also has moratorium clause of 7 years on the payment of principle component with the overall all repayment period of 10 years.  Ministry MSME is implementing various schemes and programmes to provide access to technology upgradation. These schemes include Technology Upgradation Component of Credit Linked Capital Subsidy Scheme and Technology Upgradation Scheme (CLCS-TUS), Micro and Small Enterprise – Cluster Development Programme (MSE-CDP), MSME Technology Centres (MSME-TCs), Technology Centre Systems Programme (TCSP) etc. These schemes are implemented across the country including the state of Maharashtra.

30-Jun-2021: Cabinet approves Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS) and to enhance the corpus of Emergency Credit Line Guarantee Scheme (ECLGS)

On account of the disruptions caused by the second wave of COVID 19 specially on healthcare sector, the Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has approved Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS) enabling funding to the tune of Rs. 50,000 crore to provide financial guarantee cover for brownfield expansion and greenfield projects related to health/ medical infrastructure.

The Cabinet has also approved introduction of a scheme for other sectors/lenders including those allied to better healthcare. Detailed modalities would be finalized in due course depending upon the evolving situation.

In addition, the Cabinet has also approved additional funding up to Rs. 1,50,000 crore under Emergency Credit Line Guarantee Scheme (ECLGS).

Targets:

LGSCAS: The Scheme would be applicable to all eligible loans sanctioned up to 31.03.2022, or till an amount of Rs. 50,000 crore is sanctioned, whichever is earlier.

ECLGS: It is a continuing scheme. The Scheme would be applicable to all eligible loans sanctioned under Guaranteed Emergency Credit Line (GECL)till 30.09.2021, or till an amount of rupees four lakh fifty thousand crore is sanctioned under the GECL, whichever is earlier.

Impact:

LGSCAS: The LGSCAS has been formulated as a specific response to an exceptional situation the country has witnessed due to lack of adequate health infrastructure in the light of second wave of Covid-19. The approved scheme is expected to help the country in shoring up its much-needed healthcare infrastructure along with creating more employment opportunities. The main objective of LGSCAS is to partially mitigate credit risk (primarily construction risk) and facilitate bank credit at lower rates of interest.

ECLGS: It is a continuing scheme and recently, on account of the disruptions caused by the second wave of COVID 19 pandemic to businesses across various sectors of the economy, Government has further enlarged the scope of ECLGS. The enhancement is expected to provide much needed relief to various sectors of the economy by incentivizing lending institutions to provide additional credit of up to Rs. 1.5 lakh crore at low cost, thereby enabling business enterprises to meet their operational liabilities and continue their businesses. Besides supporting MSMEs to continue functioning during the current unprecedented situation, the Scheme is also expected to have a positive impact on the economy and support its revival.

Background:

LGSCAS: Government has taken various measures to combat the crisis caused due to Covid-19 pandemic which has been upended by the second wave of COVID-19. This wave has placed enormous stress on health facilities as well as livelihoods and business enterprises in many sectors. This wave has sharply brought out the need to enhance public and private investments in the health sector. This is necessary across the country, from metro cities to tier V and VI towns as well as rural areas. The requirements include additional hospital beds, ICUs, diagnostic centres, oxygen facilities, telephone or internet based medical advice and supervision, testing facilities and supplies, cold chain facilities for vaccines, modem warehousing for medicines and vaccines, isolation facilities for triage, ramping up of production of ancillary supplies such as syringes and vials etc. The proposed LGSCAS is aimed at upscaling the medical infrastructure in the country, specifically targeting underserved areas. LGSCAS would provide a guarantee of 50 percent for brownfield projects and 75 per cent to greenfield projects for loans sanctioned up to Rs.100 crore, set up at urban or rural locations other than 8 Metropolitan Tier 1 cities (Class X cities). For aspirational districts, the guarantee cover for both brownfield expansion and greenfield projects shall be 75%.

ECLGS: The resurgence of COVID-19 pandemic in India in recent weeks and the associated containment measures adopted at local/regional levels have created new uncertainties and impacted the nascent economic revival that was taking shape. In this environment the most vulnerable category of borrowers are individual borrowers, small businesses and MSMEs, for which, ECLGS, as a targeted policy response was introduced by Gol. The design of ECGLS provides flexibility to quickly respond to emerging needs, as has been evidenced by the introduction of ECLGS 2.0, 3.0 and 4.0 as well as changes announced on 30.05.2021, all of which were within available headroom of Rs 3 lakh crore. Currently, about Rs. 2.6 lakh crore of loans have been sanctioned under ECLGS. A further uptick is expected due to changes announced recently, extension of limit of one time restructuring to Rs. 50 crore by RBI on 04.06.2021 and the continuing adverse impact of COVID on businesses.

30-May-2021: Emergency Credit Line Guarantee Scheme (ECLGS) expanded - ECLGS 4.0 for onsite oxygen generation, wider coverage of ECLGS 3.0 and increase in tenor for ECLGS 1.0

On account of the disruptions caused by the second wave of COVID 19 pandemic to businesses across various sectors of the economy, Government has further enlarged the scope of Emergency Credit Line Guarantee Scheme as under:

  1. ECLGS 4.0:100% 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%;
  2. Borrowers who are eligible for restructuring as per RBI guidelines of May 05, 2021 and had availed loans under ECLGS 1.0 of overall tenure of four years comprising of  repayment of interest only during the first 12 months with repayment of principal and interest in 36 months thereafter will now be able to avail a tenure of five years for their ECLGS loan i.e. repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter;
  3. Additional ECLGS assistance of upto 10% of the outstanding as on February 29, 2020 to borrowers covered under ECLGS 1.0, in tandem with restructuring as per RBI guidelines of May 05, 2021;
  4. 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 being limited to 40% or Rs.200 crore, whichever is lower;
  5. Civil Aviation sector to be eligible under ECLGS 3.0
  6. 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 permitted upto31.12.2021.

The modifications in ECLGS, would enhance the utility and impact of ECLGS by providing additional support to MSMEs, safeguarding livelihoods and helping in seamless resumption of business activity. These changes will further facilitate flow of institutional credit at reasonable terms.

Detailed operational guidelines in this regard are being separately issued by the National Credit Guarantee Trustee Company (NCGTC).