Emergency Credit Line Guarantee Scheme (ECLGS) which is also known as Guaranteed Emergency Credit Line (GECL) scheme is a 100% collateral free fund-based working capital term loan extended by the banks, NBFCs and Financial Institutions (FIs) to Business entities /MSMEs including borrowers of MUDRA loans constituted as Proprietorship, Partnership, a registered company, trusts, and Limited Liability Partnerships (LLPs). Individual borrowers are not eligible under the scheme. The loan provided by the banks and financial institutions up to Rs.3 lakh crore under the scheme is backed by the government guarantee. The loan under the scheme is considered to supplement borrowers’ networking capital, to meet operational liabilities and restart their businesses who have suffered from a severe cash crunch during COVID-19 crisis. The scheme is valid between May 23, 2020, and 31st October 2020, or till an amount of Rs.3 lakh crore has been sanctioned, whichever is earlier.
Business enterprises or MSMEs that have a combined outstanding loan across different banks, NBFCs and FIs up to Rs.25 crore as on 29.2.2020, and when the annual turnover of the firm is up to Rs.100 crore for FY 2019-20 is eligible for the Scheme. The facility is extended only to existing borrowers whose loan account should be less than or equal to 60 days past due as on 29th February 2020 and the borrower has not been classified as SMA 2 or NPA by any of the lenders as on 29th February 2020. A borrower must also be registered under GST, to be eligible for the loan under the scheme, unless the business is not required or exempted from having a GST registration. Udyog Aadhar or recognition as an MSME is not required under this Scheme as long as you satisfy the eligibility criteria.
Quantum of loan:
The maximum amount eligible under this scheme either in the form of additional working capital term loan facility (in case of banks and Financial Institutions), an additional term loan facility (in case of NBFCs) is set at 20% of the total outstanding loans up to Rs.25 crore as on 29th February 2020. For calculation of the total outstanding, only on-balance sheet exposure like an outstanding amount in the working capital loan, term loan, and working capital term loans will be taken. Off-balance sheet and non-fund-based exposures will be excluded. In case accounts for FY 2019-20 are yet to be audited/finalised, the Bank may rely upon Borrower’s declaration of turnover.
Margin:Nil, Borrower need not provide margin money to avail the loan under the scheme
Tenor of the loan:
|The loan under this scheme is extended for a maximum period of 4 years from the date of disbursement, including 12 months moratorium for repayment of principal. Interest shall, however, be payable during the moratorium period (usually debited at monthly interval). The principal shall be repaid in 36 equal installments after the moratorium period is over. Interest to be serviced as and when applied. There will be no pre-payment charge if a borrower wants to repay early. There will also be no processing fee for such loans. |
Banks and FIs are asked to link their lending rate to one of the external benchmark rates prescribed by RBI plus up to 1% subject to a maximum of 9.25% per annum during the entire tenor. Similarly, NBFCs cannot charge more than 14% as interest for the loans under this scheme. Security:
No additional collateral for funding under ECLGS Government Guarantee:
National Credit Guarantee Trustee Company Ltd (NCGTC) shall provide 100% Guarantee coverage on the outstanding amount for the credit facility provided under the scheme as on the date of NPA
Guarantee fee payable: Nil
Risk weight on the facility: As credit facilities extended under the scheme guaranteed by NCGTC are backed by an unconditional and irrevocable guarantee provided by Government of India, RBI notified member Lending Institutions to assign zero percent risk weight on the credit facilities extended under this scheme to the extent of guarantee coverage.