The Emergency Credit Line Guarantee Scheme, also known as ECLGS, is a type of multipurpose loan offered by the Government of India with a provision of 100% credit guarantee from the National Credit Guarantee Trustee Company (NCGTC). The ECLGS is primarily aimed at providing a line of credit loan facility to the various MSMEs and business enterprises that have taken a hit due to unfavourable COVID-related circumstances.
The Emergency Credit Line Guarantee Scheme makes up a part of the Rs. 20 lakh package announced by the Finance Ministry of India to provide emergency credit to various struggling sectors in the Indian economy. According to ELCGS guidelines, all eligible MLIs can receive an approved sanctioned amount of 20% of the outstanding loan as of the 29th of February, 2020.
Here are the criteria for credit line eligibility under the Emergency Credit Line Guarantee Scheme:
In order to determine if the line of credit loan under the Emergency Credit Line Guarantee Scheme is right for you, it might be useful the review these important features offered by the scheme:
As with any form of credit line, it is important to stay informed of the ECLGS interest rate offered under the scheme. The ECLGS interest rates provided depend on these given factors:
Apart from the aforementioned ECLGS interest rate, there are various considerations for charges and fees that must be taken into account. In the case of availing emergency credit under the ECLGS scheme, here are the relevant points:
Now that you have perused the eligibility criteria, features and interest rates associated with availing a loan under the ECLGS scheme, the typical next step in the process would be the application of the line of credit loan. However, it is important to note that the credit line offered under Emergency Credit Line Guarantee Scheme is quite different from other common forms of business loans.
Typically, the borrowing MSME or business enterprise is required to approach a lender to avail the loan. In the case of ECLGS, however, a potential lender will approach an MSME or business enterprise in case they meet the eligibility criteria set out under the guidelines. Hence, the loan application process operates on an automatic pre-approval system.
Once offered, eligible borrowers under the ECLGS scheme can also choose to avail the option to ‘opt out’ of the scheme. On the other hand, borrowers who wish to avail the benefits offered by the ECLGS such as line of credit loan and credit guarantee, can begin their documentation process.
The Emergency Credit Line Guarantee Scheme is an ideal option for struggling businesses in today’s economy owing to its provision of collateral-free emergency credit. However, there is no doubt that one of the primary features that makes the ECLGS scheme beneficial for businesses is its status as a credit guarantee fund from the Government. The complete funding that is provided under the scheme comes with a 100% credit guarantee coverage by the National Credit Guarantee Trustee Company Ltd.
Once availed, the borrowing MSME or business enterprise can then follow these repayment guidelines set out under the EGLCS scheme:
The credit line offered under the ECLGS scheme is valid till the 31st of October, 2020 or till an amount of Rs. 3 lakh crore is sanctioned under the Guaranteed Emergency Credit Line Scheme, by Banks and Financial Institutions, whichever is earlier.
Yes. The ECLGS scheme can be claimed through multiple lenders or single lenders. However, the lender will first have to assess the borrower’s total outstanding loan via the credit bureau.
The ECLGS loan will be applicable to MSMEs and business enterprises from 23 May, 2020 to 31 October, 2020 or until an amount of Rs. 3 lakh crore has been sanctioned through the scheme, whichever comes earlier.
The Emergency Credit Line Guarantee Scheme does not provide a prepayment option. Hence, the loan amount cannot be paid back before the tenure, which is 4 years.