All financial industries have been shaken by the COVID-19 outbreak. SMEs have been significantly impacted by this epidemic. However, the Government of India has made a stunning decision to assist MSME loans under the Emergency Credit Line Guarantee Scheme (ECLGS).

On February 29, 2020, the Indian Finance Ministry and the Financial Services Department unveiled the ECLGS plan. This plan assists MSMEs in meeting their daily business expenditures and other financial obligations. This initiative is said to have been part of the big economic packages of Rs. 20,00,000 crore.

In a word, the ECLGS scheme is a godsend for MSMEs who are struggling to make ends meet. The plan assists micro to medium-sized firms in meeting their daily expenditures and achieving a consistent cash flow and a healthy income.

This article will inform you more about the scheme’s eligibility conditions, application procedure, features, credit limit, interest rate, scheme validity, and much more. Continue reading.

An overivew of the Emergency Credit Line Guarantee Scheme?

The Emergency Credit Line Guarantee Scheme, or ECLGS, as the name implies, is one of the best-guaranteed credit programs in an emergency for which the government gives 100% guaranteed coverage. The initiative helps MSMEs to pursue their ambitions.

Typically, the Emergency Credit Line Guarantee Scheme is friendly to an MSME loan up to Rs. 3,00,000 crores between May 23, 2020, and October 31, 2020, under the “Guaranteed Emergency Credit Line.”

The credit product of this arrangement is known as the Guaranteed Emergency Credit Line. However, because of the Covid-19 epidemic, the ECLGS Scheme has been extended until September 30, 2021.

Features of the ECLGS Scheme

Here is a list of Emergency Credit Line Guarantee Scheme (ECLGS) features that you should not overlook.

  • The highest amount of credit available under the Emergency Credit Line Guarantee Scheme, according to the Indian Government, is Rs. 3,00,000 crores.
  • The Indian government stated that the key aim for presenting the program is to assist micro and small companies in financially sustaining themselves during this pandemic period.
  • The National Credit Guarantee Trust Company Ltd, or simply NCGTC, proposed the ECLGS scheme.
  • The duration of the ECLGS scheme is four years or 48 months. In the first year, the company must just pay interest. However, in subsequent years, the corporations are required to pay both interest and principal.
  • The Emergency Credit Line Guarantee Scheme has a few eligibility conditions. This will be covered in further detail in the next sections.
  • The ECLGS plan is available to MSMEs, small enterprises, trusts, registered corporations, and people who start up various businesses.

Eligibility for the Emergency Credit Line Guarantee Scheme

The following are the eligibility conditions for the application procedure.

  • The borrower must be a registered GST or Goods and Services, Tax registrant. These are the primary requirements for applying for the Emergency Credit Line Guarantee Scheme.
  • Candidates with SMA 2 or NPA are ineligible for this plan. Though there are no additional eligibility requirements, these are the two most important elements to examine when determining scheme availability.
  • The majority of the scheme plans are available to partnerships, registered corporations, trusts, and other recognized small enterprises. Individually owned enterprises have reduced possibilities of obtaining financing.
  • By February 29, 2020, the candidate’s accounts must have been active for at least 60 days.

These are the main considerations when applying for the Emergency Credit Line Guarantee Scheme. The ECLGS loan will only be approved if the borrowers fulfill all of the conditions.

Additional Information on the Emergency Credit Line Guarantee Scheme

This part will go through the extra elements of the ECLGS plan, such as  MSME loan interest rate, guarantee, credit limit, payback, and ECLGS scheme validity.

  • Credit Limitation: As previously stated, the loan ceiling for enterprises would be 20%. Simultaneously, it has been increased to 40% for the hotel, travel & tourist, leisure & sports industries.
  • Rate of Interest: The maximum MSME loan interest rate is around 14%.
  • Government Assurance: Under this plan, the Government guarantee coverage is 100% for a specific credit amount.
  • Repayment: The payment must be made within 48 months or four years. Typically, the first year just requires paying interest. The debtors must repay the banks they obtained the credit from with MSME loan interest rate as well as principal over the following three years. The borrowers pay the lending institutions the net amount over 36 months, or three years, in equal payments.