The advent of COVID-19 severely impacted manufacturing and other types of businesses, especially in the MSME sector. To help the people running these businesses, the Indian government launched the Emergency Credit Line Guarantee Scheme (ECLGS) under the umbrella of Aatmanirbhar Bharat Abhiyaan.
What is the Emergency Credit Line Guarantee Scheme (ECLGS)?
To offset the financial loss incurred by businesses due to COVID-19, especially by Micro, Small, and Medium Enterprises (MSMEs), the government introduced this scheme. It involved providing them with additional funding of personal loan up to Rs. 3 lakh in the form of a fully guaranteed emergency credit line.
The Emergency Credit Line Guarantee Scheme (ECLGS) is a government initiative designed to provide collateral-free loans to MSMEs and other eligible borrowers who faced disruptions due to the pandemic.
Key highlights:
- Launched in May 2020 as part of the ₹20 lakh crore relief package under Aatmanirbhar Bharat Abhiyan.
- Implemented by the National Credit Guarantee Trustee Company (NCGTC).
- Provides a 100% government guarantee to lenders (banks, NBFCs, financial institutions) against defaults.
- Loan coverage: up to ₹3.73 lakh crore sanctioned in multiple phases (ECLGS 1.0 to 4.0).
- Supports critical sectors like MSMEs, healthcare, aviation, hospitality, and more.
Phases of the Emergency Credit Line Guarantee Scheme (ECLGS)
The scheme evolved over time with four distinct phases, each addressing sector-specific needs.
ECLGS 1.0
- Target: MSMEs, business enterprises, Mudra borrowers, and individual loans for business purposes.
- Loan Limit: Up to 20% of total outstanding credit as on 29th February 2020, capped at ₹50 crore.
- Tenure: 4 years with 1-year moratorium on principal repayment.
ECLGS 2.0
- Target: Businesses in 26 stressed sectors identified by the Kamath Committee + healthcare.
- Loan Limit: For outstanding loans between ₹50 crore and ₹500 crore.
- Tenure: 5 years with 1-year moratorium.
ECLGS 3.0
- Target: Hospitality, travel & tourism, leisure, sporting, and civil aviation sectors.
- Loan Limit: Up to 40% of outstanding credit, capped at ₹200 crore per borrower.
- Extensions allowed up to 50% (₹400 crore for aviation; ₹1,500 crore for airlines under specific criteria.
- Tenure: 6 years with 2-year moratorium.
ECLGS 4.0
- Target: Healthcare sector, including hospitals, nursing homes, and oxygen manufacturing units.
- Loan Limit: Up to ₹2 crore per borrower for oxygen and medical infrastructure.
- Tenure: 5 years with 6-month moratorium.
Key Benefits of the Emergency Credit Line Guarantee Scheme (ECLGS)?
Helped Businesses Struggling With Cash Flow
The scheme gave much-needed financial aid to many businesses during the pandemic, thereby enabling the smooth functioning of business operations.
Employment Generation
The scheme helped to deal with economic challenges by making it possible for many businesses to pay wages to their workers during the lockdown period.
Sector-Specific Support
As we saw above, the government helped those sectors which were most affected and the ones that were critical for the country’s safety and well-being.
Helped the Economy to Stay Afloat
Loan schemes like these reduced dependencies on imports by supporting domestic manufacturing.
Documents Required for ECLGS Application
To apply for the Emergency Credit Line Guarantee Scheme (ECLGS), you need to submit specific documents that verify your business and financial eligibility. Having these ready ensures a quicker and smoother loan approval process.
- KYC documents of borrower/entity.
- Business registration/ incorporation certificate.
- Latest GST returns/ ITR filings.
- Loan account statement showing outstanding credit.
- Sector-specific proof (if applicable under ECLGS 2.0, 3.0, or 4.0).
Features of Emergency Credit line Guarantee Scheme
Credit Line Amount
When the Emergency Credit Line Guarantee Scheme was launched, it aimed at providing a total of ₹3 lakh crores in the form of a fully guaranteed emergency credit line to businesses.
Fully Guaranteed Credit Line
The scheme provided Banks, NBFCs and Financial Institutions a 100 percent guarantee for any losses suffered by them due to non-repayment of loans under this scheme.
Read More: Why Opting For an NBFC Personal Loan is a Better Option?
Easy Access to Credit
Under this scheme, the lenders offered pre-approved loans to businesses with outstanding credit of up to ₹25 crore.
Tenure
The loan scheme offered a four-year tenure with a one-year grace period on the principal amount.
Interest Rate
The Scheme enforced an personal loan interest rate cap of 9.25% for banks and financial institutions, and 14% for non-banking financial companies (NBFCs).
Also Read: Why Opting For an NBFC Personal Loan is a Better Option?
How to Apply for Emergency Credit Line Guarantee Scheme?
Applying for the Emergency Credit Line Guarantee Scheme is a straightforward process designed to provide rapid financial assistance. Here’s how you can apply:
- Contact Your Bank: Reach out to your bank or financial institution that is providing loans under ECLGS.
- Submit Necessary Documents: Provide the required documents as specified by your bank.
- Complete the Application: Fill out the application form provided by the bank, ensuring all details are accurate.
- Await Approval: After submission, your application will be reviewed for eligibility, and you’ll be notified about the approval status.
Who is Not Eligible for ECLGS?
Not all borrowers qualify for the Emergency Credit Line Guarantee Scheme (ECLGS). The scheme excludes certain businesses and loan categories based on specific criteria set by the government. Knowing who is not eligible helps applicants save time and explore other suitable funding options.
- Borrowers classified as NPA or SMA-2 as of 29th February 2020.
- Businesses with no outstanding loans on the eligibility cut-off date.
- New businesses without prior credit exposure.
- Accounts overdue by more than 60 days (SMA-2 or above).
Frequently Asked Question
Why Should You Know About The Emergency Credit Line Guarantee Scheme (ECLGS) Scheme?
Knowing about the ECLGS scheme is essential as it provides financial support to businesses during economic challenges, offering loans with favourable terms like low-interest rates and no collateral requirements.
What Is The Duration Of The ECLGS?
The loan tenure under ECLGS is 4 years.
Do I Have To Pay Any Processing Fee For Sanction Of Loans Under ECLGS?
No, one of the benefits of the ECLGS is that it does not require any processing fees for loan sanction.
Is Any Additional Collateral Required For The ECLGS Facility?
The ECLGS is designed to provide relief without the need for additional collateral, making it easier for businesses to access funds.
I Operate A Lending Business. Am I Eligible For The Emergency Credit Line Guarantee Scheme (ECLGS) Scheme?
The Emergency Credit Line Guarantee Scheme (ECLGS) was launched to primarily support Micro, Small and Medium Enterprises (MSMEs). You can get a loan as long as you fulfil its eligibility criteria.
Why Should MSMEs Consider The ECLGS?
MSMEs should consider the ECLGS as it offers a financial cushion with favourable terms, helping them manage cash flow during tough economic times and aiding in sustaining their operations.
What Would Be The Guarantee Of Coverage Under The ECLGS Scheme?
The scheme extends loans to all the sectors of the economy. You can know more about the guarantee of coverage from the Member Lending Institution where you would apply for the loan.
Is There A Moratorium Period That The ECLGS Scheme Mandates?
The ECLGS scheme includes a one-year moratorium period on the principal amount.
What Will Be The Security On Credit Extended Under Gecl Scheme?
The loans provided under ECLGS are collateral-free.
What is the maximum loan amount under ECLGS?
Up to ₹3.73 lakh crore has been sanctioned across phases, with per-borrower caps ranging from ₹2 crore (healthcare) to ₹1,500 crore (aviation).
Is collateral required for ECLGS loans?
No, all loans under ECLGS are 100% collateral-free.
How long does it take to get approval under ECLGS?
Since loans are pre-approved, approvals are generally quick—within days, depending on the lender.
