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Introduction

As businesses across the country recover from the economic impact of the pandemic, the Financial Ministry of India is offering a line of credit loan under the Emergency Credit Line Guarantee Scheme, also known as ECLGS. This loan is being offered with a provision of a 100% credit guarantee from the National Credit Guarantee Trustee Company, or NCGTC.

The ECLGS scheme is a component of the Rs. 20 lakh package announced on 15th May, 2020 to aid the country’s ailing business sector. Since its launch in May, the Emergency Credit Line Guarantee Scheme and its implementation has been continually monitored and assessed to ensure that the maximum number of eligible businesses can avail of its economic benefits.

Eligibility Criteria for the ECLGS Scheme

The line of credit loan offered under the ECLGS scheme can be beneficial to a variety of different businesses. However, as with any government-backed credit line schemes, the ELCGS eligibility is dependent on certain criteria such as:

  • In order to ensure ECLGS eligibility, an MSME or Business Enterprise must be registered as either a partnership, trust, limited liability partnership, proprietorship, or registered company.
  • The borrower accounts for the MSME or Business Enterprise must have a combined outstanding loan of up to Rs. 50 crore as on 29 February 2020. It must also have  an annual turnover of up to Rs. 250 crore for FY 2019-20 to meet ECLGS eligibility criteria.
  • The MSME or Business Enterprise must be GST registered in all cases where such registration is mandatory. The scheme, however, is also applicable for businesses that do not require a GST license to operate.
  • Borrowing businesses must be existing customers on the books of the Member Lending Institutions.
  • The ELCGS eligibility does not extend to loans that were provided in an individual capacity.

How to Apply for Emergency Credit Line Guarantee Scheme?

If you are a business owner impacted by the pandemic, the emergency credit provided under the Emergency Credit Line Guarantee Scheme might seem like a considerable source of relief, leading you to wonder how you can apply for it. This is where it is important to note that the loans offered under the ECLGS scheme are not the typical form of business loans.
The loan application process for the ECLGS scheme works on an automatic pre-approval mechanism. This means that instead of a business owner approaching the lender for a loan, the business is approached by the lender. The MSME or business enterprise must, however, meet the eligibility criteria set by the ECLGS guidelines.


As the loans come pre-sanctioned, this mechanism makes the process of availing credit lines easier and far more accessible for businesses. Moreover, when a loan under the ECLGS is offered, the eligible business can choose to ‘opt out’ of it if it so desires. Meanwhile, businesses that are interested can undergo the documentation process laid out by the scheme. The funding provided under the scheme comes with a 100% credit guarantee coverage by the National Credit Guarantee Trustee Company Ltd.

What is the Amount that Can be Borrowed for ECLGS Scheme?

An important factor in the process of opting for a loan under the ECLGS scheme is to determine how much of a loan amount you can actually avail. Here are the features that determine this factor:

  • Under the ECLGS scheme, the loan amount that is offered can be up to 20% of the borrower’s total outstanding loans up to Rs. 50 crore, as on 29th February 2020. Therefore, the maximum loan amount a business can secure is Rs. 10 crore.

  • One of the results that came from the Government’s diligent monitoring of the ECLGS scheme is that the loan amounts on offer have seen an increase: Previously, businesses could only avail a loan of Rs. 5 crore on an outstanding loan amount of up to Rs. 25 crore.
  • Apart from the loan amount, MSME borrowers under the ECLGS scheme will also have a separate loan account opened in their name.

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Repayment Terms of the ECLGS Scheme

As the loans offered under the Emergency Credit Line Guarantee Scheme are aimed at providing emergency credit to struggling businesses, the cost of borrowing is relatively low for potential borrowers. Here are the primary guidelines regarding the repayment of loans under the ECLGS scheme:

  • Loans availed under the Emergency Credit Line Guarantee Scheme offer a repayment tenure of up to 4 years from the date of disbursal. This repayment does not come with a prepayment option 
  • The ECLGS scheme offers a moratorium of up to one year on the principal amount. Also, during the moratorium period, the ECLGS scheme interest rate payment is expected to continue.
  • After the moratorium period is over, the principal amount is then to be paid over a period of 3 years in the form of 36 equal monthly installments.
  • Interest Rates: Banks and FIs are to link their lending rate to an external benchmark linked rate, or EBLR, prescribed by RBI +1% subject to a maximum of 9.25% per annum. Meanwhile, the ECLGS lending rates offered by NBFCs cannot exceed 14% per annum.
  • As for existing customers of MLIs, they are to be charged no extra fee since the pre-approved benefits of the ECLGS scheme is directly forwarded to them.

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